Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

Oral Answers to Questions — INDIA (MURDER OF MAJOR BAZALGETTE).

Sir Nairne Stewart Sandeman: asked the Under-Secretary of State for India whether he can furnish particulars of the murder of Major Bazalgette, political agent to the Orissa Federated States, in Ranpur at the beginning of January; and whether a military escort had, or had not, been placed at the disposal of the late Major Bazalgette?

Major-General Sir Alfred Knox: asked the Under-Secretary of State for India whether he can make a statement regarding the recent murder of Major R. L. Bazalgette in the Orissa. Federated States?

The Under-Secretary of State for India (Lieut.-Colonel Muirhead): I much regret to have to inform the House that Major R. L. Bazalgette, the Political Agent in the Orissa States, was murdered by a mob in Ranpur State on 5th January. I am certain that the House would wish to join with me in expressing sympathy with the relatives of this valuable officer.
There has for some months been agitation in the Orissa States, and Major Bazalgette was touring through his charge ascertaining which of the grievances advanced were legitimate and advising Rulers what steps they should take to remedy them. His action had done much to calm the agitation. When he arrived at Ranpur, a State with a population of some 50,000 inhabitants, he found a large crowd in front of the Ruler's palace. I understand that he entered this crowd in order to investigate the contents of a cart, said to contain the bodies of two men killed by the State police. He is said to have ascertained that the cart contained two uninjured men. Having gone some little distance

he found himself, owing to the pressure of the crowd, unable to return, and was set upon with lathis and stones and killed. I understand that he fired on his assailants after the attack on him began. Major Bazalgette was not accompanied on his tour by a military escort, and it is clear that neither he nor anyone else anticipated any danger. He was, however, accompanied in the mob by a Subadar of police from a neighbouring State and six or seven Ranpur constables. The Subadar and one constable were seriously injured. There were also outside the Palace about 40 other State police. Orders have now been issued that political officers in the Orissa States must be accompanied by military escorts. An investigation into the affair is in progress under the supervision of the Assistant Political Agent. Thirty arrests have been made.

Sir N. Stewart Sandeman: Is it not a fact that trouble might have been anticipated, as the local Communist Press had been publishing fantastic lies for some time about this officer?

Lieut.-Colonel Muirhead: I could not say that. I can only say that the episode has met with general condemnation in the Press, including the Congress organs.

Brigadier-General Sir Henry Croft: Is it not a fact that while the King's Own Scottish Borderers were on patrol through this area there were disgraceful suggestions that they had been torturing women and children; and was nothing done to stop this kind of allegation against British troops?

Lieut.-Colonel Muirhead: I believe there had been such statements in the Press. The point in connection with this question is that, nevertheless, no actual danger was anticipated as a result.

Oral Answers to Questions — SPAIN.

Sir N. Stewart Sandeman: asked the Prime Minister whether British ships have recently been sent to Valencia for the purpose of repatriating members of the International Brigade; and how many ex-combatants have been repatriated from this zone?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): No British ships were sent to Valencia for this pur-


pose since the Spanish Government arranged to transfer to Catalonia the foreign volunteers in the southern sector of Government Spain. Pending a further report from the League Commission engaged in verifying the withdrawal of foreign volunteers from Government Spain, I am not in a position to say how many volunteers have now been repatriated from the southern zone.

Miss Rathbone: Will the right hon. Gentleman see whether the Government can take some steps to expedite the evacuation of the International Brigade, in view of the great danger of their falling into the hands of the insurgent troops?

Mr. Butler: The Government are well aware of the difficulty to which the hon. Lady has drawn my attention.

Sir N. Stewart Sandeman: Is it not a fact that if they fall into the hands of the Nationalist troops they will be quite safe?

Mr. Noel-Baker: Is it not a fact that the International Brigade have been withdraw n from the firing line and disarmed?

Mr. Butler: We have been so informed by the League Commissioner.

Mr. Gallacher: asked the Prime Minister whether he has any information as to the number of British citizens arrested on 30th January in La Linea; with what offences they have been charged; and what steps have been taken to safeguard their interests?

Mr. Butler: I am informed that no British subjects were arrested at La Linea, although the passes of six were withheld pending the institution of certain inquiries. The passes have since been returned, and the men have resumed their occupations.

Mr. Noel-Baker: asked the Prime Minister whether he can make a statement concerning the recent negotiations with General Franco with regard to compensation for British ships illegally sunk by armed forces under his command?

Mr. Parker: asked the Prime Minister what action he proposes to take to secure compensation from the Spanish insurgent authorities for the damage done to British shipping trading to Government Spain; when this is to be taken; and whether he will consider confiscating property belonging to the insurgent Gov-

ernment and its supporters in this country to meet these claims?

Mr. Butler: I can at the moment add nothing to the reply given to the hon. Member for North Cumberland (Mr. W. Roberts) on 1st February about compensation for deliberate attacks on British ships. His Majesty's Government have always made it clear that the special procedure proposed for such claims is entirely without prejudice to the Government's right to present claims in respect of damage done in other classes of cases, and where necessary they have explicitly reserved the right to claim for compensation in respect of such damage. Confiscation of the property of the Burgos authorities and their supporters in the United Kingdom would amount to a policy of retaliation, on which, for reasons already explained to the House, His Majesty's Government are not prepared to embark.

Mr. Noel-Baker: Does the answer mean that the Government have so far received no reply to their last communication to General Franco, 10 days ago?

Mr. Butler: We have inquired by telegram over the week-end, and I understand to-day that a reply has been received, and that it is now being sent home.

Sir H. Croft: Is it not a fact that as long as recognition is not given to the Nationalist Government there is only one Government responsible for paying compensation in Spain, and that is the Republican Government?

Mr. Noel-Baker: asked the Prime Minister whether, during his recent visit to Italy, he proposed to Signor Mussolini that the Italian troops now in Spain should be withdrawn, in accordance with the provisions of the plan unanimously agreed to by the Non-Intervention Committee on 5th July, 1938?

The Prime Minister (Mr. Chamberlain): I have nothing to add to the full statement on the subject of the Rome conversations which I made on 31st January. The hon. Member will, however, remember that before the entry into force of the Anglo-Italian Agreement, the Italian Government had already given an assurance that they would withdraw their forces from Spain, according to the provisions of the Non-Intervention Committee's plan, if and when that plan came into operation.

Mr. Noel-Baker: Have the Italian Government at any time given any reasons why they should not themselves carry out the plan to which they agreed?

The Prime Minister: Perhaps the hon. Member will put that question down.

Mr. Arthur Henderson: asked the Prime Minister whether, in view of the fact that Signor Mussolini has declared his willingness to stand by the British plan, which was adopted by the Non-Intervention Committee in July, 1937, it is now proposed to bring the British plan into operation so as to ensure the complete withdrawal of all foreign volunteers from Spain?

Mr. Butler: I would refer the hon. Member to the reply which I gave him on 31st January, to which I have nothing to add.

Mr. Henderson: Is the Under-Secretary aware of the resolution that was passed by the Fascist Grand Council on Saturday last, that there was no intention of withdrawing Italian volunteer forces until General Franco had achieved complete victory; and does not that indicate that the Italian Government have not the slightest intention of withdrawing their forces?

Mr. Butler: I should prefer to rely upon the assurances given to the Prime Minister, and in my answer I referred to the specific point of the Non-Intervention Committee's plan.

Mr. W. Roberts: asked the Prime Minister whether the Government have made any protest with regard to the bombing of the steamship "Stanbrook" on 21st January in the Mediterranean, seven miles from Barcelona?

Mr. Butler: Yes, Sir, and a request for an immediate investigation was made.

Mr. Roberts: Has General Franco been requested to make an investigation?

Mr. Butler: Yes, Sir.

Mr. W. Roberts: asked the Prime Minister (1) whether the Burgos authorities now deny that they ever agreed to pay compensation for damage done by deliberate attacks on British ships;
(2) whether he will publish the note from the Burgos authorities upon receipt of which he announced in July the

willingness of the Burgos authorities to pay compensation?

Mr. Butler: The Burgos authorities have never denied their ultimate liability to pay compensation for the damage caused in these attacks though, as the House is already aware, misunderstandings have arisen regarding the date at which such compensation is to be paid. Since the substance of the note which was received from the Burgos authorities in July last on this subject was given by the Prime Minister in his speech on 26th July publication seems unnecessary.

Mr. Roberts: Are we to understand that the Burgos authorities have ever agreed to pay compensation?

Mr. Butler: They have never denied their ultimate liability.

Mr. Roberts: Have they ever accepted their ultimate liability?

Mr. Butler: As the hon. Member will be aware, there is an exchange of notes with the Burgos authorities on this subject of the payment of compensation going on at the present time.

Mr. Roberts: If they have not accepted the ultimate liability, on what did the Prime Minister base his statement in July?

Mr. Butler: The Burgos authorities have never denied their ultimate liability, and we have no reason to suppose that they will.

Mr. Thorne: asked the Prime Minister whether he has had any reply to his representations to General Franco on the subject of not allowing reprisals in the conquered territory?

Mr. Butler: Yes, Sir, General Franco's representative at Burgos states that the commission of acts of revenge would be entirely contrary to his policy and intentions.

Lieut.-Commander Fletcher: asked the Prime Minister whether he can make any statement on the reports received from British authorities at Barcelona as to reprisals carried out there by the representatives of General Franco?

Mr. Butler: No acts of reprisal by General Franco's forces in Barcelona have been reported by His Majesty's representative in that town who bears witness to


the order and disciplined behaviour of the troops.

Lieut.-Commander Fletcher: Is the right hon. Gentleman satisfied that if such reprisals had taken place the British authorities were so situated that the reprisals would have come to their attention?

Sir H. Croft: asked the Prime Minister whether his attention has been called to the official statement of Dr. Negrin on 2nd February, to the effect that Italy and Germany have supplied arms and munitions to the Republican Government, and that contraband supplies and help are now being received from the central and southern regions; and whether the Non-Intervention Committee has ascertained through what port or frontier such supplies have recently reached the Catalonian Government?

Mr. Butler: I have seen reports of this statement in the Press, but I understand that the Non-Intervention Committee have no evidence that such supplies have been sent.

Sir H. Croft: Have the Non-Intervention Committee inquired on the spot since this statement was made; and is it not the fact that there was a declaration throughout the world to that effect, and will my right hon. Friend cause inquiries immediately to be made?

Mr. Butler: I have said that the Non-Intervention Committee have no information, and I have also seen a German denial in the Press.

Mr. W. Roberts: Is it not the fact that the Non-Intervention Committee have no knowledge of either German or Italian armaments going to the Insurgents?

Sir H. Croft: Is my right hon. Friend aware that specific charges have been made that there were 100 aeroplane engines and many aeroplanes and 1000 machine guns still in their packing cases in Barcelona; and cannot he at least make inquiries into that matter, as it is very important?

Mr. Butler: That is dealt with in the next question.

Mr. George Griffiths: Did not the Prime Minister make a statement last week that the other nations could please themselves what they did with regard to arms for Spain?

Sir H. Croft: asked the Prime Minister whether he will draw the attention of the Non-Intervention Committee to the claim of the Nationalist forces in Barcelona that large supplies of aeroplane engines, aeroplanes and parts, have been discovered in the actual packing cases and crates in which they arrived; and whether the committee caused or will cause immediate inquiries to be made with a view to discovering the country of origin?

Mr. Butler: His Majesty's Government can only bring before the Non-Intervention Committee cases for which they can themselves vouch.

Sir H. Croft: asked the Prime Minister whether the committee investigating the bombing of non-military objectives has received an official estimate from the Nationalist and Republican Governments, respectively, of the casualties inflicted by enemy air attack upon towns, as distinct from ports, munition areas, or military centres, in the zones occupied by their respective Governments?

Mr. Butler: The Commission of Investigation have not, so far as I am aware, received any such official estimates from either the Spanish Government or the Burgos authorities. I am, however, making inquiries on the subject.

Sir H. Croft: Is not my right hon. Friend aware that official estimates have been given by both parties in Spain, and that the Nationalists say 9,000 casualties of civilians in open towns, and will he look into this matter?

Mr. Butler: I have said that I am making inquiries on the subject.

Mr. Noel-Baker: Why not suggest to General Franco that it would be better that the British Mission should inquire into the matter as well as having an inquiry on the Government side?

Mr. Butler: The British Mission is certainly available for such a purpose.

Oral Answers to Questions — DANZIG.

Mr. Bellenger: asked the Prime Minister whether the Polish Government have been consulted on the question of the retention of the League of Nations High Commissioner at Danzig; and what is the Polish attitude thereon?

Mr. Butler: Yes, Sir. I cannot, however, undertake to explain the attitude of the Polish Government.

Mr. Bellenger: Has the right hon. Gentleman had certain conversations with the Polish delegate at Geneva at which this matter was discussed; and what is to be the position of the League Commissioner and the Status of Danzig?

Mr. Butler: The latter part of the question raises rather broader considerations, and I would refer the hon. Member to the statement issued by the Committee of Three after their meeting at Geneva. With regard to the conversations I have had with the Polish delegate, I certainly kept in close touch with him throughout.

Oral Answers to Questions — GREAT BRITAIN AND PORTUGAL.

Mr. Bellenger: asked the Prime Minister what reciprocal undertakings have been given to this country in the Anglo-Portuguese treaties dating from 1373 to 1703 in return for a guarantee from Great Britain to defend Portuguese territory; and whether, in the event of Great Britain being involved in war, Portugal is under treaty obligations to assist Great Britain with her armed forces?

Mr. Butler: The treaties of 1373 and 1386 contain provisions of a reciprocal character with regard to the rendering of assistance in time of war. These ancient treaties were confirmed in the treaty of 1703 (which contained further reciprocal provisions) and again in 1899.

Mr. Bellenger: Is the House to understand from that that these reciprocal undertakings on the part of Portugal include armed assistance to this country in the event of war?

Mr. Butler: The reciprocal provisions in the ancient treaties contemplate that each party shall, if called upon, give the other such assistance as its own situation may permit.

Oral Answers to Questions — CHINA AND JAPAN.

Sir Charles Cayzer: asked the Prime Minister the number and the extent of claims for compensation received from British firms in China in respect of destruction of their property by Japanese military action?

Mr. Butler: Nearly 300 claims for amounts totalling over £230,000, on account of destruction, confiscation, damage or looting, have so far been accepted as admissible and have been presented to the Japanese Government.

Sir C. Cayzer: Can my right hon. Friend hold out any hope of an early settlement of these claims?

Mr. Butler: My hon. Friend will be aware that claims of this kind are usually settled at the end of hostilities.

Sir Henry Morris-Jones: Can my right hon. Friend give the approximate total cost of the damage sustained?

Mr. Butler: I cannot do more than give the amount of the claims.

Mr. A. V. Alexander: What reply has been received from the Japanese Government?

Mr. Butler: Their receipt has been acknowledged by the Japanese Government.

Mr. Thorne: Is it not true that the Japanese have made a declaration that they will not pay compensation for damaged property?

Mr. Butler: I should not like to accept such a general statement.

Commander Marsden: asked the Prime Minister under what rule of international law the Japanese Government an taking action to prevent British vessels from using the Pearl River as the natural means of approach to the British concession at Shahmeen?

Mr. Butler: The Japanese allege that they are conducting military operations which would be impeded by the movements of third-party shipping.

Commander Marsden: asked the Prime Minister whether he has received any statement from the Japanese Government on the question of the reopening of the Yangtze River, and the inland waterways of the Yangtze basin to foreign shipping?

Mr. Butler: No statement has been received from the Japanese Government on this subject subsequent to their note of 14th November, 1938. Further evidence of Japanese trading on the Yangtse was communicated to the Japanese Minister


for Foreign Affairs by His Majesty's Ambassador in Tokyo on 14th January last.

Commander Marsden: In view of the fact that the Japanese are trading on the river and are advertising for passengers and goods for transport, will my right hon. Friend see that our ships have the same privileges?

Mr. Butler: That is the reason for the evidence submitted by His Majesty's Ambassador.

Mr. Alexander: Are we to understand that the Government asquiesce in the holding up of British shipping; and are they going to do nothing more about it?

Mr. Butler: No, Sir.

Mr. A. Henderson: asked the Prime Minister whether, in view of the resolution adopted by the League Council, on 20th January, inviting the members of the League to examine the proposals of the Chinese Government for certain measures of economic assistance, His Majesty's Government propose to make any response to the request of the Chinese Government for assistance?

Mr. Butler: Certain proposals of the Chinese Government for economic assistance are under consideration, but I am not able to make a detailed statement at present.

Oral Answers to Questions — PALESTINE (ANTI-BRITISH BROADCASTS).

Sir C. Cayzer: asked the Prime Minister whether any shorthand records are now being kept by officials of his Department, in order to ascertain whether the recent slanderous broadcasts from German stations on the conduct of British troops in Palestine have now ceased?

Mr. Butler: Arrangements have been in force for a considerable time to obtain accurate data regarding these broadcasts, which, I regret to say, do not yet appear to have ceased.

Sir C. Cayzer: Will my right hon. Friend take an early opportunity of pointing out to the German Government the impossibility of putting the relations between our country and theirs on a better footing, as there can be no confidence as long as this lying propaganda goes on?

Mr. Butler: The position of the British Government remains as stated by the Prime Minister. I would refer my hon. Friend to his statement of 21st November last.

Mr. G. Griffiths: Would it not be wise for the hon. Member for Chester (Sir C. Cayzer) to refrain from asking such questions? Otherwise he will not get an Under-Secretaryship.

Oral Answers to Questions — DISARMAMENT.

Mr. Pilkington: asked the Prime Minister whether, in view of Herr Hitler's statement that his offers to limit armaments have been rejected, His Majesty's Government will again make it clear that they are willing to enter into discussions for this purpose immediately?

The Prime Minister: I would refer my hon. Friend to my statement on 31st January, to which I have nothing to add.

Mr. Pilkington: Will my right hon. Friend not make a positive approach to the German Government with a view to bringing this matter to a satisfactory conclusion?

The Prime Minister: I do not think the time has come for that.

Oral Answers to Questions — FRANCE (INDIAN SUBJECTS, EXPULSION).

Mr. Day: asked the Prime Minister particulars of the reports he has received from His Majesty's Ambassador in Paris as to the number of Indian subjects who have been arrested in Paris and deported during the previous six months; and can he make a statement with reference to same?

Mr. Butler: My Noble Friend has received reports from His Majesty's Ambassador at Paris concerning the expulsion from France of three Indian subjects during the past six months. The position is that His Majesty's Ambassador has been in communication with the French Government about these cases, but the latter have not seen their way to rescind the expulsion orders.

Mr. Day: Were these subjects journalists?

Mr. Butler: I know that at least two of them were journalists.

Oral Answers to Questions — CZECHOSLOVAKIA.

Mr. Noel-Baker: asked the Prime Minister whether he can make a statement concerning the recent agreement between the German and Czechoslovak Governments, by which the Czechoslovak Government have agreed that German armed forces shall have the right of transit across Czechoslovakia both in time of peace and war?

Mr. Butler: I understand that there have been negotiations between the German and Czechoslovak Governments regarding German transit traffic over the Czechoslovak railways, but my Noble Friend has received no details of any agreement which may have been reached on this subject.

Oral Answers to Questions — GREAT BRITAIN AND FRANCE.

Mr. A. Henderson: asked the Prime Minister whether the recent statement of the French Foreign Minister that in the case of war the forces of Great Britain would be at the disposal of France, just as all the forces of France would be at the disposal of Great Britain, is in accord with the views of His Majesty's Government?

The Prime Minister: According to my information Monsieur Bonnet stated in the Chamber of Deputies on 26th January that in the case of a war in which the two countries were involved all the forces of Great Britain would be at the disposal of France just as all the forces of France would be at the disposal of Great Britain. This is in complete accordance with the views of His Majesty's Government. It is impossible to examine in detail all the hypothetical cases which may arise, but I feel bound to make plain that the solidarity of interest, by which France and this country are united, is such that any threat to the vital interests of France from whatever quarter it came must evoke the immediate co-operation of this country.

Oral Answers to Questions — LIBYA (ITALIAN FORCES).

Sir Percy Harris: asked the Prime Minister how far the terms of the Anglo-Italian Agreement have been carried out in Libya for the progressive reduction of Italian troops; and whether he has any information as to the total numbers now located there?

Mr. Butler: I would refer the hon. Member to the replies given to the hon. Member for Kingswinford (Mr. A. Henderson), on 12th and 21st December, to which I have at present nothing further to add.

Sir Archibald Sinclair: These reductions ought to have continued since then, and are they still continuing at the rate of 1,000 per month?

Mr. Butler: This matter is receiving attention, and we are making inquiries. I cannot say more at present.

Oral Answers to Questions — TRADE AND COMMERCE.

ARGENTINA.

Lieut.-Colonel Dower: asked the Secretary to the Overseas Trade Department, what steps he is taking to organise the development of the export trade to Argentine of British-produced glass articles to compete with the reduced supply of similar goods obtainable from Central Europe; and whether he has yet had any interviews with British producers with that object?

Mr. R. S. Hudson (Secretary, Overseas Trade Department): I would refer my hon. and gallant Friend to the answer which I gave on 31st January to questions addressed to me by my hon. and learned Friend the Member for Leicester, East (Mr. Lyons). Information relating to recent changes in the position of glass producers in Central Europe has been brought to the notice of the Glass Manufacturers' Federation. The answer to the last part of the question is in the negative.

Lieut.-Colonel Dower: Has my right hon. Friend any information as to whether action is being taken by them to obtain this new export market?

Mr. Hudson: I do not think that we have had any communication from them on this question.

Mr. Robert Gibson: In view of the Government policy of bilateral agreements with regard to overseas trade, is it not necessary for the Government to facilitate imports into this country from the Argentine in order that the hon. and gallant Member may receive a favourable answer to his question?

Mr. Hudson: Imports from the Argentine to this country already largely exceed the exports from this country to the Argentine.

NEW YORK WORLD'S FAIR.

Mr. Ellis Smith: asked the Secretary to the Overseas Trade Department whether he can now make a full statement with regard to the arrangements made for the New York World's Fair; what are to be the special facilities to enable the maximum number of British people to attend; have arrangements been made to show documentary films of real British life; and will consideration be given to the proposal for demonstrations of British sport, to include matches to be played by English and Scottish first division association football teams?

Mr. R. S. Hudson: As the answer is long I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The British Pavilion is now well on the way to completion. The arrangements for exhibits in the Pavilion include the presentation of an historical exhibit dealing with the development of the democracies of this country and the United States. The principal exhibit in this section will be the Lincoln copy of Magna Carta. There will also be exhibits dealing with social services, the development of British mercantile shipping, historic heraldry, and the attractions of Britain. Examples of British architecture will be shown and an Art Gallery in the Pavilion will contain examples of British contemporary painting and sculpture. A Hall of Metals will illustrate the progress of the iron and steel industries of this country and there will be exhibits of fine woollens, Irish linen, fine pottery, leather, gold and silver plate, bookbinding, civil aviation, the Royal Mint, and British official printing and publications. Adjacent to the Pavilion will be an English Garden, where Military bands will play. There will also be a restaurant for light refreshments.

As regards facilities for British people to visit the Fair, I understand that the British shipping companies will make available at a reduced rate monthly excursion tickets during certain periods of the Fair. There will be a cinema to display British films, including documentary films, representing many aspects of life

in this country. I have no information regarding the proposal mentioned at the conclusion of the question.

COTTON INDUSTRY.

Mr. Burke: asked the Secretary to the Overseas Trade Department whether, in view of the fact that the Government are prepared to assist any industries which are properly organised in recapturing and safeguarding export trade, he can give any definite assurance that Government aid will be forthcoming to the Lancashire cotton industry as soon as the current proposals for its reorganisation have been given legislative effect?

Mr. R. S. Hudson: The proposals now under consideration for legislation for the cotton industry contain specific provision for financial assistance from the Government in certain directions. Apart from this, such assistance as the Government can give towards maintaining and expanding export trade will naturally be given to this as to other industries.

RUMANIA.

Lieut.-Colonel Dower: asked the President of the Board of Trade whether he will issue a White Paper showing precisely what he has done within the past six months to increase the interchange of imports and exports between Britain and Rumania; and with what result?

Mr. R. S. Hudson: During the past six months a fresh Payments Agreement has been concluded with Rumania, and His Majesty's Government have purchased 200,000 tons of Rumanian wheat. The Payments Agreement cannot produce its full effects in so short a time, but the marked increase in the clearing receipts must, obviously, facilitate the liquidation of existing engagements and an increase in United Kingdom exports. My right hon. Friend does not consider that the publication of a White Paper would be justified, especially as the necessary figures are available in the Board of Trade Journal and the Trade and Navigation Accounts.

IMPORTED GOODS (MARKING).

Mr. E. Smith: asked the President of the Board of Trade, what action he has taken, or intends to take, in order that manufactured goods shall be clearly marked as to the origin of the goods?

The Parliamentary Secretary to the Board of Trade (Mr. Cross): The Merchandise Marks Acts require all imported goods to bear an indication of origin when the goods bear the name or trade mark of a manufacturer, dealer or trader, or the name of any place or district in the United Kingdom. The interests concerned can also apply for an Order in Council requiring all imported goods of any particular class or description to bear an indication of origin. In all cases the indication of origin may be the name of the country of origin or the word "Foreign" or "Empire" as the case may be.

CLOSED SHIPYARDS.

Mr. Day: asked the President of the Board of Trade whether he is prepared to carry out an immediate survey of shipyards closed as redundant, with a view to ascertaining the possibility of reopening these yards immediately in case of war, as these closed yards would at once, in an emergency, become essential for the repair and replacement of tramp and other tonnage; and what information he now has as to the condition of these yards?

Mr. Cross: I do not think a special survey of the kind suggested by the hon. Member is necessary, as the Government are already in possession of full information as to the present and potential capacity of the shipyards likely to be available for merchant shipbuilding in an emergency.

Mr. Day: Are we to understand then that the Government do not intend to carry out any further survey?

Mr. Cross: I have already said that the Government have all the information which they require on the subject.

Mr. Leslie: Is it not the case that in the existing shipyards a large percentage of workers are unemployed at the present time?

Mr. Cross: Yes, Sir.

Oral Answers to Questions — AGRICULTURE.

POLICY.

Mr. Henderson Stewart: asked the Minister of Agriculture whether he intends to invite representatives of farm workers

in England and Scotland to confer with him in the preparation of a long-term agricultural policy; if so, when and to what bodies invitations will be sent and when consultations will begin?

The Minister of Pensions (Mr. Ramsbotham): I have been asked to reply. My right hon. Friends the Minister of Agriculture and Fisheries and the Secretary of State for Scotland propose to invite representatives of the National Union of Agricultural Workers and the Transport and General Workers' Union, so far as farm workers in England are concerned, and the Scottish Farm Servants' Section of the Transport and General Workers' Union to confer with them at an early date.

BACON MARKETING SCHEME.

Captain Peter Macdonald: asked the Minister of Agriculture whether his attention has been called to the recent case in connection with the revised Bacon Marketing Scheme under which a single pig was despatched by itself from the West Country to a factory in the Birmingham area at a cost of £2 15s.; and whether he is satisfied that arrangements have now been made to operate the allocation scheme on an efficient basis?

Mr. Ramsbotham: My right hon. Friend has no detailed information about the journey of this particular pig, but he believes that the circumstances were exceptional. The matter is one for action by the industry, and not by my right hon. Friend, but I am informed that steps have now been taken which should prevent a recurrence.

Mr. Thorne: Is the Minister aware that I had a similar question down, but the Minister of Agriculture asked me to postpone it till Thursday?

Mr. Ramsbotham: The hon. Member has the answer now.

Mr. Thorne: If that is the case, I want to know why the Minister in question asked me to postpone my question till Thursday, because he would not be here to-day?

ATTESTED HERDS (CARMARTHENSHIRE).

Mr. Hopkin: asked the Minister of Agriculture how many attested herds there are in the county of Carmarthen up to date; how many herds are waiting to be tested; what is the cause of the delay in


testing; for what length of time was testing suspended; and is he satisfied that the number of veterinary staff is sufficient to cope with the farmers' demands for testing their herds?

Mr. Ramsbotham: There are 1,419 attested herds in the county of Carmarthen, 333 herds awaiting official test and 370 herds undergoing assisted tests. While in certain cases more than the minimum period of 60 days after the last assisted test carried out by the owner's veterinary surgeon may elapse before the official test is made, generally speaking there is no considerable delay nor has there been any suspension of this work. The veterinary staff in the county has recently been augmented, and my right hon. Friend is satisfied that, subject to the occasional necessity for diverting certain of the veterinary inspectors to other duties of exceptional urgency for short periods, the staff engaged in the testing of herds is sufficient. The position is, however, being kept under constant review.

HOME-PRODUCED EGGS (PRICE).

Sir Percy Hurd: asked the Minister of Agriculture whether he has considered representations from egg-producing organisations as to the uneconomic price of English eggs, National Mark eggs having fallen 3s. per 120 or 9s. per case in the last week while production generally has not increased sufficiently to warrant any price drop; and whether steps are being taken to review the system of control of imports of eggs so as to obviate such price falls?

Mr. Ramsbotham: My right hon. Friend is aware of the fall in the price of home-produced eggs in the week in question, but such information as is available indicates that there has been a steady increase of sales of home-produced eggs since the beginning of the year. The whole position is being kept under close review, and I would remind my hon. Friend that the Government's legislative proposals for the poultry industry include provision for the regulation of imports in certain circumstances.

Sir P. Hurd: Can we have an assurance that this poultry legislation will be brought on at a period in the Session when it can be carried into law?

Mr. Ramsbotham: It will certainly be brought on as soon as possible.

FLOODS, FENS.

Mr. De Chair: asked the Minister of Agriculture whether he has any statement to make about the flood danger in the Fens; what progress has been made since March, 1937, in flood precautions; and whether the Ministry and the Ouse Catchment Board are in complete agreement as to the major schemes of flood prevention still required, and the apportionment of financial responsibility for the same?

Mr. Ramsbotham: My right hon. Friend is informed that a break occurred on 31st January in the right bank of the Soham Lode and a certain amount of flooding took place. The flood water has, however, been evacuated by pumping and steps are being taken to close the breach. In other parts of the South Level area the position was critical for some days, but water levels are now falling and I understand that the catchment board are satisfied that the situation is well in hand. Since March, 1937, schemes for the River Great Ouse Catchment Board, estimated to cost nearly £2,000,000, have been approved in principle for a Government grant of 75 per cent. With regard to the last part of the question, I understand that the catchment board are considering what further capital works are required, but until further proposals are submitted to my right hon. Friend, it is obviously impossible to say whether they will commend themselves to him. The catchment board are aware that any further scheme of a substantial character will, if approved, qualify for a grant of 75 per cent.

Mr. De Chair: Does the sum of £2,000,000 to which the Minister has referred, cover the scheme for the training walls of the Wash?

Mr. Ramsbotham: I must have notice of that question.

Mr. Shinwell: Does the scheme provide any financial assistance for the relief of those who have suffered as a result of these floods?

Mr. Ramsbotham: Perhaps the hon. Member will put that question down.

Oral Answers to Questions — CHANNEL TUNNEL.

Mr. Day: asked the Prime Minister whether, in view of the increased danger to vulnerable positions caused through the changed conditions of aerial warfare


since the issue of the White Paper on the Channel Tunnel in June, 1930, and having in mind the bearing of the recent crisis on food and other supplies of great importance to this country, he will further consider the appointment of a Select Committee to consider the advantages which would now be obtained by the construction of a Channel tunnel to be used for urgent military and/or economic purposes?

The Prime Minister: I would refer the hon. Member to the answer which I gave on Thursday last in reply to a question by my hon. and gallant Friend the Member for South Cardiff (Captain A. Evans).

Mr. Day: Can the Prime Minister say whether any approaches have been made to the Government by the French Government?

The Prime Minister: Not that I am aware of.

Oral Answers to Questions — FRENCH PRESIDENT (VISIT).

Captain P. Macdonald: asked the Prime Minister whether arrangements can be made to ensure that during the coming visit of the French President to this country he will be received in two or three of the principal provincial cities as well as in London, with a view to doing everything possible to cement good relations between this country and France?

The Prime Minister: I understand that, in view of the short duration of the President's visit and of the numerous engagements which have already been made for him, it will, unfortunately, not be possible for him to visit any provincial cities.

Captain Macdonald: Is the Prime Minister aware that there are provincial cities which would welcome a visit from the French President?

The Prime Minister: I am sure they would, but we have to make allowance for the number of engagements he has already got.

Oral Answers to Questions — FISHING INDUSTRY.

Mr. Henderson Stewart: asked the Minister of Agriculture whether he is aware of the continued decline in the numbers of men and boats and in the

earnings of the herring industry, and, in particular, the distress of skippers and crews of steam drifters; and whether it is the intention of the Government to offer any further assistance to the industry to meet the unfair and artificial obstacles placed in the way of herring exports to the Continent?

Mr. Ramsbotham: My right hon. Friend is aware of the condition of the British herring industry to which my hon. Friend calls attention. As my hon. Friend is aware, the whole position was fully considered last year and the Herring Industry Act, 1938, contained provision for additional assistance. I understand that the Herring Industry Board are applying themselves, inter alia, to the question of new markets abroad. In any case the Government will continue to do what lies in their power to open up and maintain such markets for our herring exports.

Mr. Stewart: Will my hon. Friend consider the advisability of offering some financial assistance to the trawler crews, who were not aided by the recent Act to which he has referred?

Mr. Ramsbotham: My right hon. Friend will give consideration to any proposition which my hon. Friend may bring forward.

Mr. Gibson: In taking steps with regard to new markets, will the Minister keep in view the position of the Clyde in relation to those new markets?

Mr. Ramsbotham: Yes, Sir.

Mr. Adamson: Will the herring industry be taken into consideration in this regard?

Mr. Ramsbotham: I will read again a relevant portion of my original reply:
I understand that the Herring Industry Board are applying themselves, inter alia, to the question of new markets abroad.

Mr. Day: asked the Minister of Agriculture what information he has as to the effects of restriction schemes in reducing supplies of fish to the consumers of this country; and whether, as it is desirable that this vital food should be free from restrictions on its supply, he will take steps to maintain the profits to the fishing industry on the basis of larger sales at lower prices, secured, if necessary, by sales campaigns, instead of by restriction of supply?

Mr. Ramsbotham: My right hon. Friend is aware that a voluntary scheme for regulating the operations of the distant-water fishing fleets of Hull and Grimsby has been in operation during the past year and is being continued for a further period. It was adopted as an emergency measure because over-production had resulted in bringing down the port prices of white fish to an unremunerative level. The scheme has resulted in reducing supplies below the record figure for 1937, but the total quantity of white fish landed by British vessels in 1938 was, nevertheless, the highest ever recorded apart from 1937. Moreover, while the average port price for Great Britain for 1938 was higher than that of 1936 and 1937, it was, nevertheless, well below that of 1934 and 1935.

Mr. Day: Has the Minister received a lot of representations on this subject from persons engaged in the trade?

Mr. Ramsbotham: I believe that some have been received.

Oral Answers to Questions — POST OFFICE.

TELEPHONE SERVICE, GREENOCK.

Mr. R. Gibson: asked the Postmaster-General how many applications for telephones to be connected to the Greenock exchange are waiting to be dealt with; and whether he has any statement to make on the subject?

The Assistant Postmaster-General (Sir Walter Womersley): The number of applicants for telephone service waiting to be connected to Greenock exchange is 24. An extension of the exchange equipment is almost completed, and I hope to provide telephone service for all of them within the next few weeks.

Mr. Gibson: Will they require to be shifted when the new automatic exchange is brought into operation?

Sir W. Womersley: I cannot give a reply to that question, but I can assure the hon. Member that they will get a service before and after the alterations are made.

Mr. Poole: Has not the hon. Member experienced considerable difficulty in his Department with regard to the supply of materials, and is he aware that a much worse position obtains in one of the districts in the Birmingham area, where an

hon. Member of this House has been waiting six months for a telephone?

Mr. R. Gibson: asked the Postmaster-General what work is required to be done on the site for the automatic telephone exchange in Market Street, Greenock, before the building is begun?

Sir W. Womersley: There is no work to be carried out on the actual site of the new exchange before the building is begun. As my right hon. Friend informed the hon. and learned Member on 12th December, the building has barely reached the tender stage. Before the erection of the new exchange can commence, plans and quantities have to be determined and a suitable tender obtained.

Mr. Gibson: When does the Minister expect to be in a position to invite tenders for this work?

Sir W. Womersley: I am glad to inform the hon. and learned Member that all the legal difficulties are now out of the way, and that it is a matter for the Office of Works Department in Edinburgh, who are dealing with the question of Government buildings generally.

Mr. Poole: Is the Minister not satisfied that it would be advantageous for his Department to consider the supply of materials by his own Department?

Sir W. Womersley: We are satisfied with our contractors and the system of dealing with these matters.

AUTOMATIC CREDIT POOLS, LIMITED.

Mr. R. C. Morrison: asked the Postmaster-General whether his attention has been called to the system of football pools now being organised by Automatic Credit Pools, Limited, whereby postage and postal orders are replaced by automatic machines for franking coupons; and what action he proposes to take?

Sir W. Womersley: I am aware of the system referred to, but I am advised that it would not appear to infringe the Postmaster-General's monopoly. In these circumstances I do not propose to take any action.

IMPORTED TELEGRAPH POLES.

Colonel Ropner: asked the Postmaster-General what quantity of telegraph poles were imported by his Department during 1938; and what percentage of these were carried in British ships?

Sir W. Womersley: During the year 1938, 266,875 telegraph poles were imported, of which 6,435 or about 2½ per cent. were carried in British ships.

Mr. Logan: Were these British ships built in foreign ports?

Sir W. Womersley: I cannot say, but we shall welcome British shipowners who will undertake this particular kind of work.

Oral Answers to Questions — BROADCASTING.

MINISTERIAL AND OPPOSITION SPEECHES.

Mr. Shinwell: asked the Postmaster-General the number of occasions on which Cabinet Ministers, including the Prime Minister, and other Members of the Government have had the use of broadcasting to make statements on Government policy since January, 1936; the number of times their public speeches have been reported at length by radio; and the number of times the same facilities have been afforded to Members of the Labour Opposition?

Sir W. Womersley: The questions raised by the hon. Member fall within the province of the British Broadcasting Corporation. I understand that the provision of statistics in the form desired would involve a large amount of labour, including the examination of several thousands of news bulletins. I am communicating with the Corporation on the subject and I will forward to the hon. Member the information obtained.

Mr. Shinwell: Is the hon. Member aware that there is a great disparity between the facilities afforded to Members of the Government and those afforded to Members of the Opposition, and will he advise the British Broadcasting Corporation that the same facilities which are available to Members of the Government should be made available for Members of the Opposition?

Sir W. Womersley: I am not aware of that. My information is that fair treatment is given to all parties when political questions are involved. There are other questions upon which Ministers have to broadcast which cannot in any way be described as political, and if the hon. Member takes them into account there may be a little disparity.

Mr. Shinwell: Is the hon. Member not aware that quite recently speeches of a purely political character were broadcast at length by Members of the Government, including the Prime Minister, and that this rarely happens when Members of the Opposition are making speeches in the country. Why should there he this differential treatment?

Sir W. Womersley: My information is that speeches of vast importance to the nation as a whole are given preference, and I cannot agree that the speeches of the Prime Minister were in any way political.

Captain McEwen: Does not the disparity lie in the number of voices with which the Opposition speaks?

Mr. Levy: Is it not true that these public announcements are not necessarily political but are interpreted as being political by the imagination of hon. Members of the Opposition?

Mr. De la Bère: In what category does the speech of the hon. and learned Member for East Bristol (Sir S. Cripps) come?

NEWS BULLETINS (ITALIAN).

Brigadier-General Spears: asked the Postmaster-General whether the broadcasts of news bulletins in Italian have been finally discontinued; and, if so, for what reason?

Sir W. Womersley: A news bulletin in Italian is broadcast daily on a short wavelength; but the simultaneous transmission of these bulletins on a medium wave has been discontinued as the British Broadcasting Corporation consider that the short-wave transmission is likely to be more clearly received.

Oral Answers to Questions — NATIONAL HEALTH INSURANCE.

Mr. Thorne: asked the Minister of Health whether panel doctors are expected, and permitted under the regulations, to supply any drug they wish to panel patients?

The Parliamentary Secretary to the Ministry of Health (Mr. Bernays): Insurance practitioners are required by their terms of service to order any drugs which are necessary for the adequate treatment of their patients.

Mr. Alexander: How does the hon. Member explain that some practitioners have been fined up to £100 for supplying drugs unnecessarily?

Mr. Bernays: If a prima facie case of extravagance is made out, then my right hon. Friend goes into the question with the local panel committee.

Mr. Thorne: How are you going to get this information into the hands of the various local committees?

Mr. Bernays: As far as I am aware, it is already there.

Mr. Logan: Will the hon. Member make inquiries again and see whether this is the correct answer?

Mr. Jenkins: Is it not the case that a medical practitioner has to get the consent of the Department before he orders an expensive drug?

Mr. Bernays: No, Sir.

Oral Answers to Questions — PUBLIC ASSISTANCE.

Mr. Poole: asked the Minister of Health whether he will consider issuing instructions to public assistance authorities authorising them to exclude from the income of an applicant's household when assessing relief any amounts which may be granted by private charities for the express purpose of enabling an applicant's children to receive advanced or secondary education?

Mr. Bernays: My right hon. Friend has no power to issue instructions authorising public assistance authorities to ignore such grants.

Mr. Poole: Is it not the case that private charity exists solely to enable an applicant's children to have continuous education, and that they can only make such grants to people as are in receipt of public assistance? Therefore, what is happening now is that private charities can never be used to subsidise public assistance, and that the applicant is no better off. Will the Minister consider issuing amending instructions so that people can benefit from private charity?

Mr. Bernays: My right hon. Friend has no power to issue such instructions; he is precluded by Section I of the Poor Law Act from interfering in the scales of relief.

Mr. Poole: Will the hon. Member seek the necessary powers?

Mr. Bernays: Perhaps the hon. Member will put that question on the Order Paper.

Oral Answers to Questions — HOUSING RENTS, BIRMINGHAM.

Mr. Poole: asked the Minister of Health whether his attention has been drawn to the proposal of the Birmingham City Council to impose a means test on the tenants of their municipal houses, which will result in large increases in rents to many of these tenants; whether he is aware of the large amount of discontent which exists among the tenants in consequence; and whether he is prepared to receive a representative deputation from the tenants with a view to their being enabled to put their point of view before him with the object of alteration or amendment of the proposed scheme?

Mr. Bernays: The answer to the first part of the question is in the negative. I am making inquiries, but I may say generally that the fixing of rents of council houses is by statute a matter for the discretion of the local authority. With regard to the latter part of the question, the hon. Member will perhaps allow me to defer replying until the inquiries are complete.

Mr. Cartland: Is it not the case that this scheme is going to result in lower rents to a large number of tenants, that in fact there is no general means test at all, and that the scheme is being very much prejudiced by the inaccurate propaganda of Members of the Opposition?

Mr. Gallacher: In all these schemes, while there is a reduction in rent in some cases, is there not an increase of rent in many others?

Oral Answers to Questions — LOCAL AUTHORITIES (FIVE-YEAR PROGRAMMES).

Mr. Errington: asked the Minister of Health the number of local authorities who have up to the present time sent their proposed five-year programmes to his Department; and what is the aggregate total amount of the proposed programmes so far received?

Mr. Bernays: Up to 2nd February, returns showing provisional programmes of


capital expenditure covering the five years commencing 1st April, 1938, had been received from 1,139 local authorities, the estimated capital cost amounting to about £516,000,000.

Mr. R. C. Morrison: Now that local authorities have replied, will the hon. Member ask his right hon. Friend to issue an early statement to local authorities as to what the policy of the Government is going to be in regard to this five years' scheme, realising that it will mean the employment of a great many technical people, and that local authorities are in some difficulty in knowing where they are to get this technical assistance?

Mr. Bernays: I will put that suggestion before my right hon. Friend.

Mr. H. G. Williams: In making these inquiries is the hon. Member aware that many of these local authorities are likely to go into bankruptcy first?

Oral Answers to Questions — EVACUATED AREAS (UNOCCUPIED HOUSES, RATING).

Mr. Errington: asked the Minister of Health whether steps are going to be taken in the event of evacuation as the result of national emergency to ensure that the local authorities of evacuated areas shall not suffer loss of rates due to the unoccupied houses caused thereby?

Mr. Bernays: No, Sir. No steps of this kind are contemplated.

Oral Answers to Questions — AIR-RAID PRECAUTIONS.

Mr. Garro Jones: asked the Lord Privy Seal what steps he has taken to augment the equipment for fire-fighting in the estuaries and narrow waters; and whether, having regard to the importance and vulnerability of shore works and ships in such zones, he can assure the House that he is satisfied with the steps taken for their protection from fire caused by incendiary or high-explosive bombs?

Mr. Munro (Lord of the Treasury): I have been asked to reply. My right hon. Friend is satisfied that local authorities, in preparing their air-raid fire precautions schemes, take due account of the necessity for providing appliances to deal with risks of this nature. It is part of

his policy to facilitate arrangements proposed by local authorities in whose districts such risks arise for some of the firefighting appliances supplied by the Government to be stationed on the premises of dock undertakings. As indicated in the reply which my right hon. Friend gave to a question by the hon. Member on 16th November last, fire pumps are also supplied to local authorities, where necessary, for installation on suitable craft in connection with their local fire precautions schemes.

Mr. Logan: Will such a scheme apply to the City of Liverpool where the water front is privately owned?

Mr. Munro: I will convey that question to my right hon. Friend.

Oral Answers to Questions — TERRITORIAL ARMY (YEOMANRY REGIMENTS).

Mr. Joel: asked the Secretary of State for War, what steps are being taken to increase the establishments and strengths of the Yeomanry regiments of the Territorial Army; and whether it is proposed to establish any additional Yeomanry regiments?

The Financial Secretary to the War Office (Sir Victor Warrender): The establishment of a Yeomanry regiment of the Territorial Army was increased by 36 other ranks with effect from 1st November last, and, with a view to increasing the strength of these regiments, recruitment in excess of peace establishment is authorised up to 30 per cent. The formation of additional Yeomanry regiments is not contemplated.

Oral Answers to Questions — CARD GAME.

Mr. Day: asked the Secretary of State for the Home Department whether his attention has been called to a new card game, first introduced in America, ridiculing prominent English personages, including incidents relating to the British Crown; and will he take steps, either by legislation or otherwise, to prohibit the circulation of the same in Great Britain?

The Under-Secretary of State for the Home Department (Mr. Geoffrey Lloyd): No, Sir; my right hon. Friend's attention has not been called to this game.

Mr. Day: Has not the hon. Member seen these new cards now in circulation which bring members of the Royal Family into ridicule?

Mr. Lloyd: Perhaps the hon. Member will forward them to my right hon. Friend.

Mr. Day: Will the Minister take action when they are forwarded?

Mr. Gallacher: Is the hon. Member not aware that prominent political personages are bringing themselves into disrepute?

Oral Answers to Questions — EXPLOSIVES (THEFTS).

Mr. A. Jenkins: asked the Home Secretary whether he is aware of the recent thefts of explosives from factories and other places in this country; and will he take steps to safeguard all stores of explosives so as to eliminate the danger of their use by unauthorised persons?

Mr. Lloyd: My right hon. Friend agrees with the hon. Member as to the importance of this point. There are legal requirements as to safeguarding explosive stores against theft and it is desirable that all owners of such stores should take full precautions. There has been recent consultation with the police on the subject and steps have been taken to ensure that special attention is given to this matter.

Mr. Jenkins: Can the Minister state the number of known cases of theft recently in this country from stores of explosives?

Mr. Lloyd: No, Sir, not without notice.

Mr. Shinwell: Is there no check by the Home Office or any other Government Department over the sale of materials which may form the basis of explosives?

Mr. Lloyd: Perhaps the hon. Member will put that question on the Paper.

Mr. Jenkins: May I press my question as to whether steps have already been taken to safeguard these stores?

Mr. Lloyd: Yes, Sir, I meant to make it clear in my answer that such steps had been taken, in consultation with the police.

Oral Answers to Questions — IMPRISONMENT (YOUNG PERSONS).

Mr. Turton: asked the Home Secretary in how many cases a court imposed

a sentence of imprisonment on a person not less than 16, but under 17, years of age in the years 1933, 1934, 1935, 1936, and 1937, respectively?

Mr. Lloyd: The figures are as follow: 1933, 81; 1934, 9; 1935, 9; 1936, 8; 1937, 4.

Oral Answers to Questions — GOVERNMENT DEPARTMENTS.

SHORTHAND-TYPISTS.

Mr. Banfield: asked the Financial Secretary to the Treasury the number of established shorthand-typists employed in Government Departments as on 1st April, 1938, and how many of them fell within each of the following age groups: under 21 years, 21 to 25 years, 26 to 30 years, 31 to 35 years, 36 to 40 years, 41 to 45 years, 46 to 50 years, and over 50 years?

The Financial Secretary to the Treasury (Captain Euan Wallace): 4,482 established shorthand-typists were employed in Government Departments on 1st April, 1938. With the hon. Member's permission I will circulate in the OFFICIAL REPORT a tabular statement giving their division into age groups as requested.

Mr. Thorne: Will that information convey to hon. Members and the general public the amount of pay these shorthand-typists are receiving?

Captain Wallace: No, Sir, that was not asked for.

Mr. Thorne: If I put down a question, I dare say I shall got an answer.

Following is the statement:

Established shorthand-typists employed in Government Departments at 1st April, 1938.

Age.


Number.


Under 21 years
…
…
145


21 to 25 years
…
…
1,403


26 to 30 years
…
…
1,199


31 to 35 years
…
…
724


36 to 40 years
…
…
544


41 to 45 years
…
…
248


46 to 50 years
…
…
148


Over 50 years
…
…
71


Total
…
…
4,482

EX-SERVICE MEN.

Mr. Joel: asked the Financial Secretary to the Treasury whether, in view of the undertaking by his predecessor that they hoped to be able to place as many


as 10,000 ex-Service men in the Civil Service during the two years 1937–39, he can now state the numbers of such men who have actually been absorbed?

Captain Wallace: Although complete statistics are not available, the figures in my possession show that more than 10,000 ex-Service men have been placed in Civil Service employment since March, 1937, when the undertaking referred to was given.

Oral Answers to Questions — IMPORTED FOODSTUFFS (DUTIES).

Mr. De Chair: asked the Financial Secretary to the Treasury how much money is raised annually by tariffs on articles of imported foodstuffs which are also grown in this country?

Captain Wallace: It is not possible to give a precise figure, but the answer is approximately £29,000,000 for the year ended 31st March, 1938.

Mr. De Chair: May we assume, therefore, that there is approximately that sum available for the protection of agriculture?

Captain Wallace: My hon. Friend may draw his own conclusions.

Mr. Alexander: Is it not a fact that that sum has been overspent in subsidies to the industry?

Oral Answers to Questions — TRANSPORT.

ROADS (LIGHTING).

Mr. R. C. Morrison: asked the Minister of Transport what steps are being taken to secure reasonable uniformity in the lighting of portions of traffic routes, as recommended by the Departmental Committee on Street Lighting?

The Parliamentary Secretary to the Ministry of Transport (Captain Austin Hudson): Before making agreements with the responsible lighting authorities for the lighting of trunk roads, my right hon. Friend satisfies himself as to the adequacy of the installation proposed. He has no control over the lighting of other roads, but has brought the committee's report to the notice of all the principal lighting authorities, and the systems which have recently been installed show that regard is being had to the committee's recommendations.

ELECTRIC TRAINS, LIVERPOOL AND SOUTHPORT (FIRES).

Mr. Errington: asked the Minister of Transport the number of occasions during the past five years when there have been fires on electric trains on the Southport and Liverpool railway line; and whether he will make representations to the London Midland and Scottish Railway Company to improve their rolling-stock on this service?

Captain Hudson: I am not in a position to give my hon. Friend this information, but I am in communication with the London Midland and Scottish Railway Company and will let him know the result as soon as possible. I have drawn the attention of the company to the latter part of the question.

Oral Answers to Questions — BURMA.

SITUATION.

Sir N. Stewart Sandeman: asked the Under-Secretary of State for Burma whether he can make a statement regarding the present situation in Burma?

Lieut.-Commander Fletcher: asked the Under-Secretary of State for Burma whether he will make a statement on the situation in Burma?

The Under-Secretary of State for Burma (Lieut.-Colonel Muirhead): My Noble Friend has been kept fully informed by the Governor of recent events which indicate the existence of a state of unrest and a tendency to disorderliness in Rangoon and in certain other centres in Burma. There have been organised marches of unemployed workers in the oilfields to Rangoon where they have been joined by cultivators. On 20th December there was a clash between the police and a body of university students and school children who were picketing the Secretariat. On the 22nd December it was necessary for the Governor to declare a state of emergency under the Rangoon (Emergency) Security Act, 1938, and arrests of certain leaders of the present subversive movement were made. Attempts which have been made to call general strikes have failed but a large proportion of the workers in the oil refineries have ceased work, and sporadic strikes have occurred in other trades; there have also been school and university "strikes" and boy-


cotts. As the question of transport for the movement of police became acute at the beginning of January an Ordinance was issued on 4th January by the Governor, acting with his Ministers, giving the competent authorities throughout Burma power to requisition motor vehicles on payment.
On 23rd January, 11 important leaders of the Thakin organisation were arrested at their headquarters at the Shwe Dagon Pagoda and a quantity of papers was seized which will probably form the basis for a prosecution. Force has had to be used on several occasions recently, and, although in most cases baton charges have sufficed to disperse unruly crowds firing has been resorted to on three occasions: (a) in the Lower Chindwin district when two were wounded; (b) in Thayetmyo when two or three were wounded; and (c) in Rangoon on 31st January when there were no casualties.
The House will see that, in the last six weeks, there have been a number of deplorable incidents which have necessitated the use of force, but effective steps continue to be taken to deal with disorder and there have been no violent reactions to the use of force on particular occasions. Firm orders have been issued by the Government to their officers that the law must be enforced. I would remind the hon. and gallant Members that the primary responsibility for the maintenance of law and order in Burma has been laid by Parliament upon Ministers in Burma and no occasion has yet arisen for the Governor, in the exercise of his special responsibilities, to take action without consulting his Ministers or against their advice.

Captain P. Macdonald: Will my hon. and gallant Friend say what was the cause of these disturbances? Was it religious, political or industrial?

Lieut.-Colonel Muirhead: I think a good deal of light on the question of the underlying causes will be found in the recently-issued interim report of the committee that was appointed to investigate into the riots in Burma last year. These underlying causes are examined in detail by the committee under the following heads: The unsatisfactory conditions of land tenure; the effect of Indian immigration, particularly of Indian labour, and the participation of Indians in the economic life of Burma; the marriage of

Burmese women with foreigners in general, and Indian in particular; the Press, and other political influences.

CHINESE FRONTIER ROAD.

Captain P. Macdonald: asked the Under-Secretary of State for Burma whether the Government of Burma is giving any assistance to improvement of the existing road to the Chinese frontier whence it is continued to Yunnan; and, if not, whether, in view of the development of this trade route to the Far East, it can bring this thoroughfare up to modem standards?

Lieut.-Colonel Muirhead: The Government of Burma have already brought the road from Lashio to the Chinese frontier—a distance of about 120 miles—up to an all-weather standard, and further work is in progress upon its improvement.

Oral Answers to Questions — REFUGEES.

Mr. Day: asked the Prime Minister whether the Government have approached other nations with a view to raising jointly the requisite finance for the extensive preparations necessary to render the area of British Guiana, mentioned by him, suitable for Jewish immigration; if not, is it the intention of the Government to do so, or do they intend to act alone?

Mr. Butler: The answer to the first part of the question is in the negative. As my right hon. Friend the Secretary of State for the Colonies informed the hon. Members for Dudley (Mr. Joel) and East Birkenhead (Mr. White) on 31st January, a Commission of Inquiry will shortly arrive in British Guiana to examine the possibility of the settlement of refugees in that Colony. Consideration of the method of financing any settlement which may prove possible must await the Commission's report.

Mr. Day: Has any approach been made to His Majesty's Government by other Governments on this subject?

Mr. Butler: I should want notice of that question.

Oral Answers to Questions — MINISTER FOR THE CO-ORDINA TION OF DEFENCE.

Mr. Garro Jones: asked the Prime Minister whether the present Minister for the Co-ordination of Defence is to have


any duties or any staff additional to those which appertained to his predecessor; and whether the present Chancellor of the Duchy of Lancaster is to have any staff and duties, and, if so, what duties other than that of representing the Defence Minister in this House?

The Prime Minister: The arrangements in regard to these matters cannot be determined in detail until there has been an opportunity for discussion with the Minister for the Co-ordination of Defence who only reached this country on Saturday afternoon on his return from India.

Mr. Garro Jones: Has it been decided where these two Ministers will be housed? Will they be housed under the same roof?

The Prime Minister: If the hon. Member means whether they will have offices under the same roof, the answer is "Yes"

Mr. Garro Jones: While thanking the right hon. Gentleman for his superior choice of words, may I ask him whether he can assure the House that the staff provided for these Ministers will be more effective than that given to their predecessor who has now left that office?

The Prime Minister: That would be impossible.

Oral Answers to Questions — CIVIL ESTIMATES (SUPPLEMEN TARY ESTIMATES, 1938).

Estimate presented,—of the further sum required to be voted for the service of the year ending 31st March, 1939 [by Command]; Referred to the Committee of Supply, and to be printed. [No. 45.]

Orders of the Day — CURRENCY AND BANK NOTES BILL.

Order for Second Reading read.

3.43 p.m.

The Chancellor of the Exchequer (Sir John Simon): I beg to move, "That the Bill be now read a Second time."
This Bill, as hon. Members will see, is necessarily of a somewhat technical character. It is a Measure which does not easily lend itself to popular exposition and I can hardly hope to treat it, if I may borrow a phrase from Mr. Disraeli, which is also attributed to Lord Stowell, with
the sweet simplicity of the Three per Cents.
The Bill is concerned with certain details of our monetary mechanism, but it raises no question of any change of monetary policy. In order to appreciate what these changes in detail are, it is necessary that we should remind ourselves of the general subject-matter and recall some recent events which have made it opportune to introduce the Bill. If hon. Members look at the Title of the Bill they will see that it refers to the Issue Department of the Bank of England and the Exchange Equalisation Account. The reference to the place of payment of Bank of England notes is dealt with in Clause 4 of the Bill, and is a subsidiary matter.
The Exchange Equalisation Account has been considered by the House from time to time in recent years. It will be remembered that it was established by Section 24 of the Finance Act, 1932, after the suspension of the Gold Standard. At first it was provided with a fund of a total of £150,000,000. Since then there have been two successive additions to the total, and the amount now provided for the fund is £550,000,000. Its purpose, as the Statute declared, was, of course, to check undue fluctuations in the exchange value of sterling. The other account, that of the Issue Department of the Bank of England, has a longer history. It has its origin in the Bank Charter Act, 1844, which was one of the most striking and most memorable achievements of Sir Robert Peel. Under that Act, as the House knows, the issue of notes by the Bank of England has to be kept absolutely distinct from the banking business of the Bank, and, therefore, when the

Bank publishes its weekly accounts, we see that the Issue Department account and the Banking Department account are stated separately. The sum total of Bank of England notes issued is, as the House knows, always exactly equal to the total value of the assets shown in the Issue Department's account. Those assets are partly gold and partly securities. As regards securities—what is called the fiduciary issue—the law fixes what is the normal size of the fiduciary note issue. At present, under Section 2 of the Currency and Bank Notes Act, 1928, the normal size of the fiduciary issue is £260,000,000. That, however, is subject to the power of the Treasury, on the representation of the Bank of England, from time to time either to increase or to diminish temporarily that normal total of £260,000,000.
I have said so much to remind hon. Members of the general structure of the account of the Issue Department of the Bank of England. There is one other feature of that account which lies at the heart of our present problem. It has always been the case that the gold in the Issue Department of the Bank of England has been valued in that account at 85s. per fine ounce. Of course, as long as we were maintaining the Gold Standard that was necessarily and rightly so, owing to the interchangeability of gold and currency, but after we left the Gold Standard at the end of 1931, the Bank in fact continued to value its gold in the Issue Department account at this old parity of 85s. Indeed, there is statutory authority for that, because if hon. Members look at the Finance Act, 1932, under which the Exchange Equalisation Account was set up, they will find that Section 25 (2, a) validated and preserved this position.
Perhaps hon. Members will allow me to dwell for a moment upon this figure of 85s. I do not think you will find that figure, as a figure, anywhere in the Statute Book, and indeed the Section in the Finance Act of 1932 to which I have just referred mentions a different sum. It mentions £3 17s. 10½d., but that is what is called the Mint price of one ounce of standard gold. It is interesting to recall that the authority long ago that first fixed that figure was no less a person than Sir Isaac Newton. Sir Isaac Newton in the year 1717 was Master of the Mint, and in that year he established the rule that the guinea should be valued at


twenty-one shillings. Now one troy pound of standard gold, one pound by troy weight, was coined into 44½ guineas. If an hon. Member desires to amuse himself with a little elementary arithmetic, I think he will find that if he divides 44½ guineas by 12, that being the number of troy ounces to the troy pound he will arrive at this statutory figure of £3 17s. 10½d. But we still have to look for the more familiar 85s., and that is to be got in this way: Standard gold consists of eleven-twelfths of fine gold and one-twelfth of alloy. The figure of 85s. is the figure for an ounce of fine gold, and consequently the figure of £3 17s. 10½d. has to be submitted to a further arithmetical operation and have one-eleventh added to it, and by that means you arrive at a figure which is, I think, just one halfpenny short of 85s. [An HON. MEMBER: "Who gets the halfpenny?"] So much for the story of 85s.
I now wish to remind the House of some of the recent events which make it, I think, opportune to introduce and carry this legislation now. The House will remember that over a long period which ended last Spring the gold stocks in this country were continuously increasing. The total value of gold in the Exchange Equalisation Account and in the Issue Department of the Bank of England put together, at 31st March of last year, and stated for convenience at a common value of £7 an ounce (the usual value for the purpose of such a calculation), was £835,000,000. That very great accretion of gold in this country was due very largely to the deposit in London of short-term capital funds owned by foreigners who preferred the monetary security of London to that of their own country. Funds of that kind are notoriously volatile; they come and go. I believe they are what the City sometimes calls "hot" money; they are refugee money, and they may at times be a nuisance rather than a source of strength to the country which receives them. If you receive them, you have to be ready to hand them back, and that is what happened to a large extent in the ensuing six months. Between the end of March of last year and 30th September of last year there was a very considerable exodus of this refugee capital, with the result that when we came to 30th September our gold holding of six

months before had been diminished by a sum of £146,000,000, and we were left with £689,000,000. It is convenient to say that of that £689,000,000, £151,000,000 was in the Exchange Equalisation Account and the rest in the Issue Department of the Bank of England.

Mr. Bellenger: At what value?

Sir J. Simon: At £7 an ounce, which is stated in the Return. It is the general character of the movement, I think—

Mr. Dalton: At what date was this?

Sir J. Simon: In the six months between 31st March and 30th September there was a loss of £146,000,000 of gold valued at £7 an ounce, and what I want to stress, and therefore will repeat, is that the stock left, the very substantial amount of £689,000,000, was for the most part in the Issue Department, and only £151,000,0000 of it was in the Exchange Equalisation Account. That is the last date, as the House knows, for which precise figures are available, but it is the fact—I state it, and I think it is common knowledge—that there had been a continuance of that tendency during the rest of the year. In one or two respects it had its bright features. For example, there is no doubt at all that some of the loss was due to a repatriation of French funds in Paris, and that is an indication which we may look upon with satisfaction as an earnest of the return of internal confidence in the French financial situation. We have every reason to be glad of that and to congratulate the French upon It. There was also another influence at work, not perhaps quite so welcome. There was for a time certainly a growth of some undesirable speculative activities against the £—"bears" who were selling the £ calculating that it would go down—and there is no doubt that that had an influence in causing the gold value of sterling to decline.
In that situation, at the end of the calendar year, at a very early date in January, I had to consider whether some fresh step should be taken. The Exchange Equalisation Account had lost a good deal of its gold, and it was very necessary that that fund should be fortified for the purpose of helping to sustain sterling. There was also this fact to be borne in mind: we wanted more gold for the Exchange Equalisation Account, and the question was, Where should it be got from? Well, the main part of the


gold in the Issue Department of the Bank of England, the very large amount to which I have referred, had been transferred there from the Exchange Equalisation Account since the time in 1932 when it was established. It was new gold, and in those circumstances I thought—and I believe that the opinion of those who advised me was supported by other expert opinion—that the right course last month was to retransfer from the Issue Department to the Exchange Equalisation Account this block of new gold; and the Exchange Equalisation Account by that means acquired £350,000,000 of new gold at the current value. It was placed in the Exchange Equalisation Account, where it lies ready for the use for which it w as primarily intended. That was the important operation which was announced on 7th January last.
If I have succeeded in reminding the House of the rather curious feature that gold in the Issue Department is valued at only 85s. and yet the moment it is released from that Department is recognised in other accounts as being of the current value, it will be appreciated that £350,000,000 of gold in round figures for the Exchange Equalisation Account is provided not by taking £350,000,000 from the Issue Department but by taking something like £200,000,000 from the Issue Department, because of the lower value attributed to the gold in that Department. It will also be clear to the House that if one reduces the amount of gold in the Department by £200,000,000, it is necessary contemporaneously to increase the fiduciary issue, unless indeed one is going to alter the total of bank notes issued. It was necessary to increase the amount of the fiduciary issue by the same amount as that by which the gold had been diminished. Therefore at the same time £200,000,000 was added to the fiduciary issue authorised in the Issue Department Account.
I mentioned earlier in my speech that the normal figure of the fiduciary issue was £260,000,000, but in fact owing to a Treasury Minute it had been limited to £200,000,000 for the time being, and therefore the addition of the new £200,000,000 made £400,000,000 as the amount of the fiduciary issue. In that situation it was very necessary to consider what further action it would be right to take. It was perfectly lawful for the Treasury Minute to be made on the representation of the Bank enlarging the

fiduciary issue to £400,000,000 as a temporary expedient, but it is a very large increase, and it seemed to me that though the Act of 1928 contemplated the possibility of the fiduciary issue being thus raised by Minute, still this was raising it above its normal statutory level, and in view of the size of the increase and the rather unusual circumstances in which it arose, it seemed to me right that we should come to Parliament and that Parliament should have an opportunity of dealing with the matter. Accordingly at the same time early in January when this great block of gold was moved from the Issue Department to replenish the Exchange Equalisation Account, at the same time as the Minute was made which authorised the fiduciary issue to be raised to £400,000,000, an announcement was made that legislation would be proposed to this House to amend the Act of 1928. This Bill is the Bill which has been prepared in order to carry out that intention.
I think that the plainest and simplest way to regard the matter now is to ask hon. Members, in considering this rather technical matter, to imagine the actual situation of the account of the Issue Department. It is an account which is made once a week, drawn up every Wednesday and published every Thursday, and those interested in these things study it closely in connection with their business. I have the actual account of last week before me. I almost wish that I could have circulated it. Hon. Members will see at once the significance of the figures if I mention three. The Issue Department shows, of course, on the left-hand side, the debit side, the total of notes issued; that is the liability of the Bank; and the total is in round figures £526,000,000, notes of different denominations now issued by the Bank of England. Not all those notes are in circulation. As a matter of fact £471,000,000, or nearly £472,000,000, are in circulation, and £54,000,000 are in the Banking Department, and it could release them if necessary in order to make small adjustments; but the point is that last Thursday, when the weekly account was issued, £526,000,000 was the total of the note issue of the Bank of England.
On the other side of the account are two items. One is the item of gold and the other the item of the fiduciary issue. Those two things have to add up to exactly the sum of £526,000,000, as they


do. Owing to the transactions and transfer I have mentioned, the two figures are these: the amount of fiduciary issue, £400,000,000; gold coin and bullion, £126,000,000; and that again adds up to £526,000,000. It seems to me that that is not a satisfactory or really an accurate way of stating the position. You get those figures of a very large fiduciary issue and a comparatively small figure for gold, because we are continuing the practice of valuing the gold in the Issue Department at 85s. and as long as you value it at that low figure, little more than half its current value to-day, the figure for gold appears unduly small and the figure of the fiduciary issue is unnecessarily large.
The object of this Bill is to secure that for the future week by week as the weekly account is put out, the gold that is in the Issue Department shall be valued at its current figure. If hon. Members will turn to Clause 2 of the Bill and look at Subsections (1) and (2) they will see this provision:
The assets held in the Issue Department of the Bank of England shall be valued on the day on which this Act comes into operation and thereafter once in each week.
For the purpose of every such valuation, the assets shall be valued at such prices as may be certified by the Bank of England to be the current prices of those assets respectively on the day of the valuation.
The current price to-day is 148s. 5½d., and the effect therefore of this Bill, as soon as it becomes law, will be that there will be applied to the gold in the Issue Department what is its real current value and not the somewhat antiquated thing which can be traced back through the days when we were on the Gold Standard; and consequently this £126,000,000 would be more properly and correctly stated as about £220,000,000. In present circumstances no one wants for any reason at all merely to increase the number of notes issued. We want to keep the number issued as it is. As soon as you put the proper value on the gold it follows that you no longer want this very large fiduciary issue of £400,000,000. In fact when it is reduced as the normal thing to £300,000,000 it will be adequate for purposes of the account. If hon. Members look at Clause 1 they will see that it provides that the fiduciary note issue shall be fixed at £300,000,000, and in paragraph (b) they will see that

any Treasury Minute in force at the commencement of this Act under the said Section eight shall cease to have effect.
That is to say, the Minute which the Treasury made the other day, the Minute which put the total up to £400,000,000, will cease to operate.
I claim, and I think I am supported by a large body of competent authority, that the change which this Bill would make is appropriate and entirely justified. It makes no sort of difference to the fundamentals of our currency, but it is a change in machinery and a more accurate statement of the present facts, and as such I hope it will commend itself to the House generally. There is one consequential difficulty which, of course, must be dealt with. As soon as you value the gold in the Issue Department at its current value week by week, it follows, of course, that you would have rises and falls according to the course of the price of gold, with the result that week by week you would have to adjust your note issue to correspond, for it must always be exactly equal to the total value of the assets.
Of course, if there were good reason at any time for altering the note issue, it should be and could be altered. For example, just before Christmas there was an increase in the fiduciary issue for the purpose of providing for the necessities of the Christmas trade. That is commonly done shortly before Christmas and the amount sinks shortly afterwards. But you do not want to alter the total number of notes issued merely as a result of fluctuation in the value of gold, and therefore you want to have some other method by which you can secure that the figures on the assets side of the Issue Department will be right and will not require, as an unnecessary consequence, an adjustment of the amount of notes issued.
I have considered carefully how that could be dealt with. It would be a material inconvenience if on each weekly valuation slight alterations in the price of gold were inevitably to produce slight modifications in the total value of the assets and a corresponding modification of the total of notes issued. For that reason I propose in the Bill that a weekly adjustment shall be made between the Issue Department and its sister account the Exchange Equalisation Account to compensate for these small variations. It is a


technical and unimportant provision in itself, but it is a convenience for the purpose of accounting and it follows very closely the analogy already provided by Section 25 of the Finance Act, 1932.
Those are the main proposals of the Bill. I think the House will feel that it is justified and that it is an advantage to get rid of this figure of £400,000,000 of fiduciary issue published week by week in the Issue Department Account. It is a fictitious figure. We might suppose it meant that four-fifths of our bank notes had to rely on something other than gold. That is not true. We shall do much better if we do not show ourselves to the world as having something like £400,000,000 of bank notes covered by Government securities when in fact a substantial fraction of them is covered by gold. On the whole, so far as I have observed, these proposals have been very well received by expert opinion outside, but I would like to make this observation in order to remove possible misunderstandings. There is no trace of inflation in the present proposals. Nor is there any trace of deflation. If there were an increased demand for notes owing to more active trade and better prices we should be as well placed to meet it as we are now. The effect of such a demand would be, I suppose, in the first place to reduce the Bank's reserve of notes. If that reserve were thereby reduced to an inconveniently low level, the Treasury are empowered on the representation of the Bank to take steps to increase the fiduciary note issue, or, alternatively, gold could be added to the Issue Department.
That being so, the proposal I have to make should everywhere be regarded, whether good or bad, as being a change in our monetary machinery, for that is really all it is. Let us see how this will work out. One effect of the first revaluation of the gold in the Issue Department will be to set at liberty an amount of approximately £95,000,000. I look at it in these difficult times with anxious eyes ready to welcome any good thing that will come our way, but I am bound to say quite plainly that in any ordinary sense that is not a profit. It is rather in the nature of an unrealised capital appreciation which has been there for a long time past, but has not received statutory recognition or appeared in the accounts. An unrealised capital appreciation of that

character is not appropriate for use as if it were revenue and I am not proposing so to use it. My proposal is that this sum, subject to a deduction which I will mention, shall be passed to the Exchange Equalisation Account where it will constitute a capital reserve.

Sir John Wardlaw-Milne: Does that mean that Treasury bills will be reduced by that amount and thereby go to the banks holding them to make cash liquid? Is that how it will work? Will this £95,000,000 go to a reduction of floating debt?

Sir J. Simon: It will simply increase the assets in the Exchange Equalisation Account. How it is dealt with within the limits my hon. Friend referred to is a matter for consideration. I am only concerned to say that I do not consider that revaluing the gold in the Issue Department provides any increased revenue. The assets that are held by the Issue Department are gold and the cover to the Fiduciary Note Issue. The Issue Department works for the account of the Exchequer and the State receives any profits which the Issue Department earns, less the expenditure of maintaining the note issue. For example, if the Issue Department has securities which increase in value or earn interest, any excess over the total amount which must be maintained in the Issue Department to cover the note issue is available and is passed over to the State. The securities fluctuate in capital value; in some years the profits of the Issue Department have been swollen by appreciation, while in other years they have been insufficient to cover the depreciation. For instance, the profits from the Issue Department in 1932–33 were considerable, and something like £11,500,000 was paid into the Exchequer. In the Budget there is an item known as "miscellaneous receipts," and that is where it goes. At present, after a long period of falling security prices, the depreciation stands at £9,000,000.
As long as we were valuing the gold in the account at the low figure of 85s. an ounce, carrying thereby an enormous concealed reserve, a small depreciation in another part of the account did not amount to anything of much moment. But we are now going to value the gold in the Issue Department account at its proper current value. Accordingly, at


the first revaluation of the gold, it will mean a transfer from the Issue Department of some £95,000,000. I propose to make a net transfer of £86,000,000. The difference of £9,000,000 remaining in the Issue Department will then bring up the current market value of its assets to the exact amount of notes in issue. That, I think, is the proper way to deal with the situation. There remains the point of what is to happen in future. The securities in the Issue Department will fluctuate, sometimes producing a surplus which will pass from the Department, and at other times depreciating and leaving a certain gap which ought to be filled. The present situation is not satisfactory because, while the Issue Department has to pay out any appreciation as part of the profit that it makes, there is not a satisfactory arrangement for making good any deficiency.
I think we ought to utilise the Exchange Equalisation Account to receive the profits and also to make good any deficiency on the securities as well as on the gold held by the Issue Department. The Exchange Equalisation Account holds gold and securities, and, like the Issue Department, it operates for the account of the Treasury so that transfers between the two accounts cannot mean any loss to the State. It seems to me that the most convenient and simple solution is to provide that the Exchange Equalisation Account shall receive from the Issue Department any profits of the note issue, including appreciation, and shall make good any depreciation. That is the solution set out in Sub-section (3) of Clause 2 and Sub-section (2) of Clause 3 of the Bill. That will enable us to keep the assets of the issue Department precisely adjusted at current market prices to the note issue.
I will venture a small analogy. I conceive the Issue Department as a tank in which there ought to be maintained a certain head or pressure of liquid—a certain head of value. As long as the note issue remains the same that head should always remain exactly the same and should not get bigger or smaller. We should not keep in the tank anything which is added as a result of accretion and should not leave the tank to suffer if there is any evaporation or drop in the level. The Bill secures that the level or the pressure in the Issue Department tank is kept exactly right.

Mr. Bellenger: I notice in Sub-section (2) that in valuing the assets allowance will be made for any premium that may be included in the current market value. Does that mean that only par value will be taken in assessing the value of the assets in the Issue Department?

Sir J. Simon: I will discuss that, if I may, on the Clause. I would not like to speak of very difficult matters without full knowledge. I have done my best on a rather difficult subject to make the matter intelligible and, I hope, a little interesting.
There are three points I would wish to emphasise. In the first place, it is most important to bear this in mind. Hon. Members will agree that I spoke justly when I said just now that this Bill is concerned with the details of our monetary mechanism. It would be a great misfortune if the idea got abroad, quite contrary to the facts, that it presages or indicates some change of monetary policy. Secondly, I ought to repeat that neither when the Fiduciary Note Issue was raised a month ago to £400,000,000, nor now, when the House is asked to fix its level at £300,000,000, is any question of inflation or deflation involved. Thirdly, to obviate all possibility of misconception, let me say that this proposal for weekly revaluations of the assets of the Issue Department at the current price is a change of machinery and has no bearing whatever upon the question of the time or the manner of our ultimate stabilisation on gold. We are working an archaic rule in the Issue Department which has led to valuations which were misleading, and we are substituting for those valuations a calculation which is right because it meets the actual facts of the situation.

Mr. Benson: What does the right hon. Gentleman mean by "our ultimate stabilisation on gold?" Has he that in mind?

Sir J. Simon: I was saying that I hoped nobody would draw any inference on that subject from the contents of this Bill.

Mr. Benson: But that does not cover my point.

Sir J. Simon: I think it puts the point very clearly. Since the Bill does not deal with this subject at all, apart from whether it would be in order or not in


order I think it would be outside the scope of my remarks to talk on such a subject. It is not what I am thinking of.

Mr. Benson: What the right hon. Gentleman said was that this Bill did not in any way influence or control our ultimate stabilisation on gold and my question was, Has he in mind, quite apart from this Bill, or have the Treasury in mind, any ideas as to ultimate stabilisation on a gold basis?

Sir J. Simon: I do not think it was put in precisely those words. The observation has not been quite correctly quoted. I wrote it down and here it is. I said,
It has no bearing whatever upon the question of the time or manner of our ultimate stabilisation upon gold.
That matter of high policy was dealt with in a monetary declaration of the British Commonwealth at the Ottawa Conference, which was in turn reaffirmed by the declaration of the British Commonwealth at the conclusion of the World Monetary and Economic, Conference in 1933. As the House knows, and as the hon. Member will be glad to learn, those declarations continue to stand.
In now asking the House to give a Second Reading to the Bill I do not think it is necessary for me to go through all the Clauses of it. In what I have said I have tried to make their intention plain. There is one Clause, of no particular importance, Clause 4, which deals with a quite different matter. In that Clause we have taken the opportunity to deal with two small matters. Clause 4 provides that Bank of England notes of £5 and upwards may be payable at the head office of the Bank whether issued at the head office or otherwise. That is only a matter of business convenience. It brings the notes of higher denominations into line with the £1 and 10s. notes. Sub-section (2) of the Clause provides for a repeal of the provision, which has been on the Statute Book ever since 1844, requiring the Bank to issue notes in return for gold at the old price of 85s. per ounce. Nobody is in the least likely to come forward to-day to perform that very unremunerative operation, and I think it is about time we took that, as well as other antiquities to which I have referred, off the Statute Book. I commend this Bill to the support of the House. It deals with what is for all of us, no doubt, a highly technical subject, but I do not believe that it is

calculated to produce any serious consequences, and if I have succeeded in making plain the scope and the limitations of its purpose I trust that I may have support in all quarters of the House for what I regard as a useful and not a revolutionary Measure.

4.33 p.m.

Mr. Dalton: I am sure that the Chancellor of the Exchequer has enjoyed himself in unravelling with his customary lucidity the subject matter of the Bill, and we have all enjoyed listening to yet one more of his expository tours de force. In his last sentence he said that it was not a revolutionary Bill, and on that he and I shall be in agreement as against some comments passed by certain city editors easily frightened by changes, no matter how small. I think that in particular the city editor of the "Times" used this epithet when commenting on the Bill last week. I have wondered whether the proposals in this Bill originated in the Treasury or in the Bank of England, and I am inclined to suspect that it was in the Treasury. I think one sees here evidence of the fresher minds of some of those in the Treasury rather than of the more old-fashioned and stereotyped outlook of the Bank of England, and in particular of its Governor. Broadly it seems to me that these changes are in the right direction, and that this Bill marks a further step, even although a small step, towards an intelligently-managed currency. It is a step away from the old-fashioned automatic, supposedly, though not really, fool-proof currency, such as we enjoyed, or at any rate suffered under, in the old days of the Gold Standard. I was, however, a little disconcerted in that opinion by the phrase which the Chancellor of the Exchequer let fall, and which my hon. Friend the Member for Chesterfield (Mr. Benson) quickly picked up. The Chancellor said that this Bill did not in any way affect—I think I am quoting correctly—the time and manner of our ultimate stabilisation on gold.

Sir J. Simon: I think it was "the question of the time and manner."

Mr. Dalton: I was a little disconcerted when the Chancellor let fall those words, and I hoped they meant as little as he seemed to be endeavouring to persuade my hon. Friend that they meant. I hope that this Bill, if it marks any movement


at all in relation to the time and the manner of our ultimate stabilisation on gold, postpones that time yet further. I have been encouraged in that belief by the observations of Mr. Norman Crump in the "Sunday Times" when he said that the Bill deliberately refrained from fixing a new price for gold—
for that might give the impression that the authority contemplated the stabilisation of the pound at that level in terms of gold and so in terms of the dollar.
Well, we will leave it for the moment where it is. I will content myself with saying that my hon. Friends have frequently declared against any return to the Gold Standard and the fixation of the pound in terms of gold, and if we thought—I do not say we do think—that this Bill was moving at all in that direction then certainly we should have to oppose it, but I am sure that is not the case.
The Chancellor has explained that this Bill substitutes a true valuation of gold based upon market valuation in terms of sterling for that fictitious and, indeed, rather ludicrous figure of antiquity, the 85s. per ounce. This appears to me to be a sensible and proper provision. It is thus in some degree a Bill for the "debunking" of gold. It recognises that gold is only a commodity like any other commodity, having, like any other commodity, a sterling price which varies from time to time. Without going outside the Rules of Order perhaps I may be permitted to say this: As part of the process which I call "the debunking of gold," this valuation of the gold stocks in terms of sterling prices variable from day to day, does raise in one's mind this query, particularly when the Chancellor was quoting the enormous figure of £689,000,000 as the value of our gold stocks in September, 1938, even although he says they subsequently diminished. It did raise in my mind the question of whether, having regard to all the requirements of national defence and national economy, it is a sensible plan to retain such an enormous mass of value in the form of gold, and whether it would not be better if some of that gold, at any rate, were transformed into other commodities more useful both in time of peace or war, such as stocks of food and raw materials. Without pursuing that point, which would obviously be out of order except for a passing reference, it

did occur to me that, with this enormous quantity of gold valued now as food is valued and as raw materials are valued, according to its sterling price of the moment, it would be well worthy of consideration whether the national finances in the truest sense would not be strengthened if part of these gold stocks were to be transformed into food stocks and stocks of raw materials.
The Chancellor of the Exchequer spoke about the so-called gold profit, and we were interested, I am sure, in what he said, not so much as to the facts, which are fairly well understood by those who study these matters, as in his intention with regard to this sum of £96,000,000 or thereabouts, which is sometimes called the gold profit. But this, as one writer in the Press has properly said, is now merely a disclosed reserve, whereas before it was a hidden reserve, although well known to all persons acquainted with the elements of the situation. The question that interests us, I think, is not so much that the veil has now been drawn aside from this reserve, but what the Chancellor of the Exchequer is going to do with it. If I understand the matter correctly, what has happened has been merely this, that the Exchange Equalisation Account is now going to have, in addition to its borrowing powers amounting to about £575,000,000 as laid down by Statute, which are, in fact, represented by gold, by securities and perhaps by other assets—it is now to have in addition £100,000,000 of further reserves in the form of securities. But, only if the Treasury sold these securities or any part for cash and spent the proceeds currently, would the term "profit" be applicable to the transaction.
What interested the House, I am sure, was to know what the Chancellor's intentions were in this matter, I understand that he is going to take £9,000,000 out of the £96,000,000–10 per cent. of the total—and use it in order to make up for a depreciation which has taken place in the securities held in the Issue Department. That leaves between £80,000,000 and £90,000,000 which he says that he does not propose at this moment—I think I am quoting him correctly—to treat as current revenue. I do not know how long "this moment" is going to stretch. I do not know whether we are getting a definite undertaking to-day that in his next Budget he will not propose to use


any of this £80,000,000 or £90,000,000—does the right hon. Gentleman wish to say anything?

Sir J. Simon: No, not at all.

Mr. Dalton: I was only anxious to know how far ahead this commitment extends not to spend this nest-egg, or what is left of it after providing for the depreciation of the securities.

Sir J. Simon: The hon. Member will find that what I said was quite plain. It would be a great pity if false ideas got about and I am sure that he would regret that as much as I should. I thought it my duty to say, and I did say:
A capital appreciation of this character is not appropriate for use as if it were revenue and I am not proposing so to use it.
I think that is quite definite.

Mr. Dalton: That was definite, but a few sentences later the right hon. Gentleman used the phrase "at this moment." I took particular note of it.

Sir J. Simon: I do not recall it.

Mr. Dalton: I think the OFFICIAL REPORT will show.

Sir J. Simon: I had not the slightest intention of qualifying what I had said, which I had better repeat:
An unrealised capital appreciation of that character is not appropriate for use as if it were revenue, and I am not proposing so to use it.
I went on to say:
My proposal is that this sum, subject to a deduction which I will mention, shall be passed to the Exchange Equalisation Account, where it will constitute a capital reserve.
I shall be glad to have the hon. Member's co-operation in fixing that quite clearly, as I do not want there to be any doubt about it.

Mr. Graham White: I should like to point out that if that profit does accrue to the Exchange Equalisation Account it must wait there till the Account is wound up.

Sir J. Simon: What the hon. Member has said is perfectly right. Once it has passed to the Exchange Equalisation Account as a reserve I should have no power to use it in the nefarious ways suggested by the hon. Member.

Mr. Dalton: The Chancellor could take power to sell some part of the securities by a Clause in the Finance Bill. That is

where the power would come from. I was anxious to establish the meaning of "at this moment" in the Chancellor's intentions and it was not an unreasonable question to ask. He has now made it perfectly plain that he is not going to use any of this money to pay for the Arms Bill or any other current expenditure in his next Budget. We take note of that.
I confess that I am a little in doubt—I do not think anyone need apologise for that, because this is a complicated matter—as to the method according to which the total note issue will be fixed in the future. No doubt as the Debate proceeds either the right hon. Gentleman himself or the Financial Secretary will give some more explanation on that point. Some commentators have said that the provisions of the Bill furnish a new liberty of varying the note issue, and that there will be more elasticity in the future. The point has been put by the "Times" commentator in this way:
Whereas hitherto the amount of gold in the Issue Department governed the amount of the note issue, now apparently the amount of the note issue will govern the amount of the gold in the Issue Department.
He may have got a wrong impression, but I am anxious to get the point cleared up. Is there or is there not now a greater elasticity with regard to the total note issue? Are the Government, by means of these rather complicated arrangements, which the Chancellor explained very clearly but which are none the less rather complicated, for balancing between the Issue Department and the Exchange Account, thereby acquiring any additional liberty of varying the note issue up and down? That is my question, and I shall be interested to get a reply.

Sir J. Simon: Would the hon. Gentleman like me to answer now?

Mr. Dalton: just as you please.

Sir J. Simon: It will be very convenient to do so. No, there will be no greater liberty. The note issue can be varied, as the hon. Member well understands, only if there is a corresponding variation in the total assets of the Issue Department. That can be brought about by increasing the amount of gold which the Issue Department holds; it can be brought about by varying the amount of fiduciary issue within the limits of time which are permitted. That has always been so, and it will be so now.


There will be no greater latitude than before. All these things will be exactly the same as they were before. The only reason why I introduced this provision by which the Exchange Equalisation Account would still make up any little differences week by week was because if I did not do it there would necessarily have to be the printing of a few more notes or the cancelling of a few more notes and, for mechanical and other reasons, it is much better to keep your note issue constant until a real reason comes along for changing it. When a real reason comes, you can change it in exactly the same way as before.

Mr. Dalton: I am very much obliged to the right hon. Gentleman. If a reason comes for changing it, you are still as you were before. When I put the question I should not have quarrelled if the answer had been the other way, if the Chancellor had said that he was getting greater liberty. I may, perhaps, be incurring the censure of the Chair for going beyond the terms of the Bill but I should like to remark that it may be a matter for consideration whether an upward movement in the currency issue would not now be desirable from the point of view of the stimulation of trade without incurring any risk of causing an inflationary rise in prices. This seems to be strictly in order on the Bill, because it prescribes the amount of the fiduciary note issue. It is arguable that it might have been better to place a rather higher figure on the upper limit of the fiduciary issue in future. That would, of course, involve an upward movement in the total of the note issue, corresponding to a given amount of gold held, but that might be desirable as one of the means by which we could aim at getting our resources better into employment and bringing more assistance to backward sections and geographical areas of industry. But I do not Debate that point now.
One matter that must have struck everyone on reading the Bill and listening to the speech in explanation of it is that the Exchange Equalisation Account is gradually extending its functions. I am not complaining of that. I am merely making an observation. It was originally invented merely as a device to iron out short-term fluctuations in the exchange rates between sterling and the franc and the dollar. Now it is going to

perform another function, according to the Chancellor's explanation. It is going to be used to iron out not merely fluctuations in the rates of foreign exchange, but also the fluctuations in the total of the note issue. It is becoming a more important instrument of finance and of currency management. Of that I make no complaint. I merely observe that that is so. But this raises a point on which some of my hon. Friends feel rather keenly, and I, therefore, ask a question relating to the publicity which is to be given to the increasingly important operations of this account.
Some of my hon. Friends are concerned to know how much publicity will be given, and how much hon. Members of this House will be told, regarding the operations of the Account and the variations in the composition of the assets in the hands of the Account from time to time. I should be obliged again, but not necessarily now—when it is convenient—if we could be told what arrangements are intended by way of public statement or statements through the Public. Accounts Committee, with regard to these matters. It might plausibly be argued, although I can see the arguments on both sides, that the operations of this account are now getting so large that it is important in the public interest that we should know what is going on. That is an argument for more and more frequent publicity. I imagine that it could also he argued that we do not desire everybody to know what is happening, especially certain characters in other countries.
There was one small point which the Chancellor did not make clear to me, but which is, no doubt, clear enough, under the terms of Clause 3 (2) with regard to the provision:
The Treasury shall pay into the Account all sums received by them after the commencement of this Act in respect of the profits of the Department under Section six of the Currency and Bank Notes Act, 1928.
Am I right in understanding that hitherto the profits on the currency note account have accrued as miscellaneous revenue, and have been paid into the annual income of the Treasury, but that now they are not going so to accrue, but will be paid into the Account itself, and remain there?

Sir J. Simon: The present position is that there is a statutory provision which secures to the Treasury any of the profits


of the Department. The Issue Department is, of course, managed by the Bank of England, but it is managed on behalf of the Government. The profit it makes comes to the public purse. Curiously—and this is really a defect in our present arrangements—there is no corresponding provision by which the Issue Department can be fed, if, instead of making a profit, it makes a loss, by securities depreciating. You will observe that under the Bill we stop that hole. We have an arrangement now whereby what I call the level in the reservoir will be kept constant. For reasons I gave, we are doing that through the Exchange Equalisation Account. Consequently you have to pass the present claim of the Treasury to the Exchange Equalisation Account, which will get the profit.

Mr. Dalton: Does that mean that whereas certain sums are now paid into the revenue, they will not be paid in future, and that to that extent the Chancellor will be receiving somewhat less revenue?

Sir J. Simon: The Account will also be making good the loss.

Mr. Dalton: I think I understand the point. At any rate, it can be raised again if it is not clear when we reach it in Committee. I have made some observations and asked certain questions, many of which have already been answered. There are matters which could be more properly dealt with in Committee but I would like to conclude by saying that we do not regard this Measure as revolutionary, but as a rather small measure not of first-class importance, although it is making alterations which we consider are in the right direction. We shall not divide the House on the Second Reading of the Bill, but we reserve our right to raise these and other matters by way of Amendment upon the Committee stage.

4.56 p.m.

Mr. White: In his opening sentences the Chancellor of the Exchequer observed that this was not a revolutionary Measure. The hon. Gentleman who has just spoken has concurred in that view. I am inclined to think that they would both agree that at all events the Measure formally marks a complete revolution in practice since the days, of which the right hon. Gentleman reminded the House, when Sir Robert Peel was responsible for passing

the Bank Charter Act in 1844, when a particularly rigid school of thought prevailed, fixing the currency in a rigid relationship to gold. Over the intervening period we have passed by a series of changes to a condition which will be formally marked to-day. We have passed to a complete system of managed currency. I believe that the Bill goes somewhat further in that direction than the Chancellor led us to suppose in the course of his most lucid explanation.
The right hon. Gentleman did not dwell particularly on Clause 3, which enables gold to be transferred to or from the Issue Department of the Bank and the Exchange Equalisation Account. I had assumed in reading the Bill that these changes were intended to be purely correctional changes related to slight variations in the price of gold, but they might be used equally to control the currency issue to whatever degree the Government might think desirable at any particular time. My contention would, therefore, be, subject to correction, that the Government have now, under the terms of the Bill and subject to Clause 3, completely in their hands an instrument for managing the currency of this country. I do not complain about that. If I am wrong, I shall be glad to know what limitation there is of the powers which the Government have under the Bill. I make no complaint that that should be the case, because the Bill formally recognises the alignment of all the resources of our country, if not for the control of our currency, for the defence of it.
The hon. Gentleman referred to the increasing importance of the part played by the Equalisation Account. The Chancellor of the Exchequer referred to it as a sister Account, but I am not sure that it is not the dominant partner at the present time in these transactions. I am glad that the right hon. Gentleman has set at rest any speculations that might be made as to the possible future destination of the nest-egg of £95,000,000. I remember that at this time last year, when the Budget was casting an ominous shadow before it, a number of people were speculating as to what rod the Chancellor of the Exchequer would draw from his armoury and lay upon the backs of the taxpayers. Those who were optimistically inclined said that it would be all right, because the Bank's stock of gold would be revalued. They pointed out


that that had been done in America, and more than once in France, and they suggested that a kindly Chancellor of the Exchequer would undoubtedly bring forth this nest-egg and smooth away their difficulties. I am glad to find that the Chancellor of the Exchequer does not propose to adopt any such easy device at this time for helping us over any of our difficulties, because nothing could do more to damage the financial confidence in which this country is held than to resort in our budgetary arrangements to dodges and devices and windfalls of that kind. I am somewhat relieved that those speculations have been set at rest, at all events for the present.
With regard to the less important aspects of the Bill, and the advantages that will accrue from it, I entirely agree with the statement made here to-day that it is obvious that the new arrangement for the valuation of the Bank's stock of gold will facilitate the day-to-day transactions, accountancy problems and the like, as between the Equalisation Fund and the Issue Department of the Bank, which must have been a source of annoyance, if not of difficulty, in the past; and in so far as this revaluation will enable observers abroad to see our banking arrangements in a truer light, I certainly agree with the Chancellor of the Exchequer that the new arrangement will be all to the good. In so far as it simplifies the accounts of our national finances as a whole, it is an advantage, because anything which makes for simplicity must make for better and wider understanding. It is remarkable that we should be discussing here a Bill dealing with currency and finance which must affect more or less everybody in the country, but which, nevertheless, requires all the right hon. Gentleman's ability and powers of explanation to make it clear to the House of Commons. What is the fate of the ordinary man in the street, who is going to be affected vitally by this arrangement, whether he knows it or not?
I would put in a plea for greater publicity, if possible, in these matters, and a greater effort to interpret them to the people of the country. The hon. Member for Bishop Auckland (Mr. Dalton) also has made a plea for greater publicity in relation to these matters. In 1929, in a book which the Chancellor of the Exchequer will recollect, entitled "Britain's

Industrial Future," we laid particular stress on that aspect of the matter, and urged that the Treasury and the Bank should from time to time issue such explanations as they might feel able to give of the policy which they were endeavouring to achieve by their financial arrangements. It would be a great advantage if that could be done. All sorts of speculations are continually going on in the financial world as to what the Treasury are working for, and it would be of great assistance in financial and other quarters of the country if there could be greater publicity in that respect.
I have been wondering what would happen if I were to mention the words "liberty" and "democracy" in the course of this Debate. I should like, if I may dare to do so, to mention them in this way. If democracy and liberty are to survive, it is one of the conditions of that survival that democrats everywhere, in this and other countries, should be far more aware of what is going on in the world than they are at the present time; and that applies, not only to the forces which may be arrayed against this country, but also to the financial aspect of national affairs. On that account we may welcome this Bill. We recognise that it deploys our resources for the defence of our currency and of our standard of living better than has been done before, and that it gives to the Government far greater powers of manoeuvre and deployment of those resources to meet changing conditions, or attacks like the incoming and exodus of "hot money" to which the Chancellor of the Exchequer referred. We should, however, be misleading ourselves if we thought that these arrangements do not rest, and rest entirely, upon the maintenance of a balance of trade, and, in the final resort, upon our export trade. The whole financial structure which we are considering to-day rests upon the condition of our trade, and we should be making a great mistake, and deceiving ourselves, if we thought that Bills of this kind in any way obviated the necessity for hard work and endeavour to maintain our export trade at the maximum figure that is possible. Therefore, the words "liberty" and "democracy," although they may seem irrelevant, are not so irrelevant as they may seem at first sight.
There is one question which I have seen raised, and with which I should be


glad if the Financial Secretary would deal in the course of his reply. It is stated by some people that under this Bill the authorities will no longer have the power to acquire any holding of gold in excess of £10,000 at the rate of 85s. an ounce. Other commentators, with equal confidence, say that that power remains, and it is thought that it may have some bearing upon the activities of gold hoarders and others in the future. It might be as well if that matter could be finally set at rest. This Bill does not seem to us to be a revolutionary Measure, although it marks what may be in effect a revolution which is taking place, as revolutions usually do take place in this country, so gradually that perhaps its effects are not at the moment recognised. We think that the Bill will bring about greater simplicity and greater elasticity in our national accounts, and for that reason we welcome it. At the same time, we feel that an effort should be made to make these matters plainer to ordinary people, because, whether they understand them or not, their lives are going to be considerably altered by the way in which the new arrangements work out.

5.10 p.m.

Sir J. Wardlaw-Milne: Like the hon. Member for East Birkenhead (Mr. White), I do not think the word "revolutionary" can be applied to this Bill, but, again, like him, I think that perhaps the House has not appreciated, from the very lucid statement of the Chancellor of the Exchequer, how far-reaching its provisions are. In fact, if I have a complaint at all, it is that my right hon. Friend's explanation was so clear and interesting as to be likely to give the impression that in reality this is a small matter, merely a matter of machinery, and that there is no underlying principle behind it. Actually, as I see it, this Bill—and I welcome it very much from that point of view—is the last nail in the coffin of the old Gold Standard. As I say, I welcome it from that standpoint particularly, and I fancy that that sentiment will find an echo in other parts of the House. But there are many Members still in this House who can recollect a time when, if such a statement had been made, it would almost have been hissed, so startling is the change that has taken place in the course of the last 15 or 20 years. The old Gold Standard, from which trade and industry

suffered so much, has, I think and hope, gone for ever.
This Measure, undoubtedly, will improve the machinery of the working of the note issue of the Bank of England, and I think it will simplify the conditions in which the Exchange Equalisation Account is working. But let us be quite clear what it is that we are doing. Really we are entirely reversing the present procedure. Under the present procedure, the amount of gold in the Issue Department governs the note issue; now the note issue is going to govern the amount of gold in the Issue Department. That is really what is happening, and to my mind it is the right method of working. What we want—what we have always wanted—is that the amount of currency available as issued by the Bank shall be such as the trade and industry of this country require, and such as will provide for what we all hope will be our growing prosperity. The supply of currency for national needs should not be governed by the amount of gold which the Bank may happen to hold.
While, however, I very strongly welcome the Bill and the principle underlying it, there are one or two points with which the Chancellor of the Exchequer, at this stage, has not perhaps fully dealt. One is as to what is to be the future position of the Exchange Equalisation Account itself. The Account is to make up any deficiency in the Issue Department, and, alternatively, it will take up any surplus from that Department. As was said by the hon. Member for Bishop Auckland (Mr. Dalton), the Exchange Equalisation Account was originally intended for the purpose of "ironing out" excessive fluctuations in connection with international exchange. I think, if I remember correctly, that the phrase used, at the time when the Bill setting up the Account was introduced, was that it was not intended to stem a tide, but merely to iron out temporary fluctuations. The Account is now really to control the supply of currency, and, therefore, we have left an Exchange Equalisation Account, and have come to an Exchange and Currency Equalisation Account. I have no objection to make to that, but I think it raises, in connection with the future of the Account, one or two questions which will require some further consideration.
I should like in the first place to repeat in more detail, and with some


apology for the rather crude form in which I put it in the middle of the Chancellor's speech, the question I put to him as to how this nominal profit of £95,000,000 is going to be dealt with—or rather, £86,000,000, after adjustment has been made. I quite appreciate—and it has been repeated by the right hon. Gentleman in reply to a further question, since he spoke, that he has no intention of taking that profit as a windfall into revenue. I should not have expected for one moment that would have been the intention, and I cannot see the necessity for his being asked to emphasise it so clearly. But there is no harm in his having done so. Still, there is a nominal profit of £90,000,000 or thereabouts, and if we are going to make the position clear it is as well to let the public know what is to be done with this sum. I agree, of course, that it is a book entry, and does not affect money in any way; but is it going to reduce the floating debt and release Treasury bills?
There is another and larger point, which I think naturally rises in one's mind when considering this Bill. The Exchange Equalisation Account is now to be—I borrow the phrase from the right hon. Gentleman opposite, and I gladly credit him with the authorship, for it is a good phrase—the dominant partner in the future procedure. The Exchange Equalisation Account, therefore, should have sufficient gold to satisfy all demands. It may have, as it has had in the past, demands made upon it for that gold. Between 1932 and 1937 this country saw a great influx of money—whether or not it was "hot" money or other forms of fugitive money, a great deal came into the country—but, as has been explained to-day, a great deal went out last year, and the Exchange Equalisation Fund has to be ready to meet such an exodus of money at any time. I do not know of any way in which we could be sure of always having the money to meet a drain of that sort except by stopping the export of capital. That may or may not be a suitable method, but obviously one cannot go into it now. Suppose that there had been no drain upon us, and that as between 1932 and 1937, money had continued to pour into this country, the Exchange Equalisation Account would have had to go on buying gold. I agree

that such a position does not arise to-day, but it might some day be extremely inconvenient to buy all gold offered.
The gold output of the world went up by 85 per cent. between 1929 and 1936. Suppose the output of gold goes on increasing at that rate. Are the Exchange Equalisation Account in this country and the authorities in America going to be able to purchase all this gold at the present high price? These are questions that are bound to arise in one's mind. It is not an impossible picture of what might happen if we had years in which there was no demand on us for gold and we were asked to buy very large quantities. It is not a very profitable arrangement to pay people to bring out gold from the ground to bury it in the vaults of the Bank of England or in underground strongrooms in Kentucky, however valuable gold may be as a war reserve or insurance. If the output of gold grows at the rate at which it has been increasing of recent years, the position may become embarrassing. It is easy to say that the position could be rectified by curing the present maldistribution of gold, but it is very difficult to do that. As far as I can see that maldistribution can be corrected only when we get back to a free flow of trade. Another alternative, perhaps, is to make it not so profitable to produce gold. That could be done, assuming that it is not possible by international agreement to fix a lower price, by raising the price level in our own country. There is, to my mind, nothing that is more urgently needed.
My right hon. Friend referred to the declarations made at the end of the Ottawa Conference and after the International Economic Conference. One of the points then urged was the necessity of raising our price level. There has been no sign of our being able to do it. Our price level to-day is a long way below 1929 and still further below 1900. If we could only raise our price level it might have a very great effect upon our industrial prosperity. That could be done only by co-operation with the United States of America, as their problems of unemployment and low price levels are the same as ours. Such an increase, by adding to costs, would make it less profitable to produce gold, and would possibly put some of the low-grade producers out of business. A drop in the price of gold should only come about very gradually,


and nobody wants to upset an enterprising and valuable industry.
Apart from the issues I have raised, I may sum up in three or four sentences all I want to say further upon this Bill. It is a Measure that I welcome. I believe it is an important step forward, even if it is not revolutionary. It sounds the death knell at last of the myth which so long existed, that gold is really necessary as the basis of our currency. The actions taken by the Government since 1931 have brought us gradually to the position we have reached to-day of being able to free our currency. These measures have helped our trade, expanded our industry, and, to some considerable extent reduced unemployment. I believe this Bill will help still further to make our industries prosperous. At any rate, we can say that there is nothing now in our currency arrangements and nothing in our money system which prevents us putting all our people in employment and achieving real prosperity.

5.21 p.m.

Mr. Bellenger: There was one part of the interesting speech just delivered by the hon. Gentleman opposite with which I did not quite agree. That was the part in which he said that our currency is no longer based on a gold backing. He might qualify that statement on reflection, because, although our currency is not based on gold to the extent that it used to be, it is nevertheless quite evident, from the figures that the Chancellor gave us to-day, that there still is a belief in the gold backing to currency, not only in this country but in others as well. The Chancellor told us that to-day—or, I think he said on 30th September, 1938—there was £689,000,000 of gold in the Exchange Equalisation Account and the Issue Department of the Bank of England, even after considerable withdrawals had taken place. That indicates that there is still a substantial gold backing for our currency.

Sir J. Wardlaw-Milne: I quite appreciate that. The point is that we are not bound by gold as we were. If the hon. Member will allow me to direct his attention to the Clause in the Bill, he will see that adjustments are to be made. Sub-section 3 of Clause 2 says:
if, as the result of any such valuation, the value of the assets then held in the Department differs from the total amount of the Bank of England notes then outstanding,

there shall be paid to the Department from the Exchange Equalisation Account (in this Act referred to as 'the Account') or to the Account from the Department such sum as will counteract that difference…

Mr. Bellenger: I think there is not a great deal of difference between the hon. Member and myself. What he means to say, and what I accept, is that we are not so rigidly bound by the Gold Standard as we used to be. But I should imagine that the Exchange Equalisation Account will continue to buy gold, and I expect that some of that gold will eventually find its way into the Issue Department of the Bank of England by virtue of that Sub-section to which the hon. Member referred.

Mr. Mabane: Of variable value.

Mr. Bellenger: No doubt. But if we assume that the variable value fluctuations are considerable, may it not be possible that not only will assets be transferred to the Issue Department, but considerable quantities of gold itself?

Mr. Loftus: Surely the amount of gold is regulated under this Bill by the note issue, instead of, as under the old system, the note issue being regulated by the amount of gold in the Bank of England?

Mr. Bellenger: That may be so, but the currency of this country to-day has still a considerable gold backing. That is the only point that I mentioned in disagreeing with the hon. Member's speech.

Sir J. Wardlaw-Milne: I did not intend to give a different impression.

Mr. Bellenger: Perhaps it was my fault that I did not quite get the impression that the hon. Member wished to convey. Not the least interesting part of the speech which the Chancellor of the Exchequer delivered was that historical survey in which he was able to tell us the reason for 77s. 10½being the price for an ounce of gold. I confess that I never knew before how that mystical figure was arrived at, but I am not in the least surprised to hear that it goes back to the days of Sir Isaac Newton.

Mr. Austin Hopkinson: It is not really a question of Newtonian philosophy but of relativity

Mr. Bellenger: At any rate, it is Chancellorian historical research. It was interesting to listen to the Chancellor of


the Exchequer giving some of the elementary facts relating to the accountancy manner in which the housekeeping or the financial affairs of the nation are carried on. The right hon. Gentleman in his somewhat disarming speech led the House to believe that this was merely a minor matter and something affecting the nation's book-keeping; that he was merely introducing into the nation's bookkeeping, modern methods such as modern businesses introduced into their own affairs from time to time. I naturally accept the explanation of the Chancellor of the Exchequer, but I am wondering why it has been left to the Chancellor to find out these defects in our banking system so late in the day. I am inclined to think that possibly more serious events than domestic accountancy in the Bank of England or in the Treasury have led the Chancellor of the Exchequer to introduce the Currency and Bank Notes Bill which is now before us. As the right hon. Gentleman rightly told us, the Bank Charter Act, 1844, introduced rigidity into our currency and financial system, but he probably knows that that Act was circumvented by various methods during the last century, principally by the cheque system of dealing with money transactions. When we went off the Gold Standard in 1931 it further alleviated the fixity which was brought into effect by the Bank Charter Act, 1844.
In certain quarters the step which the Chancellor of the Exchequer is proposing to take has been described as revolutionary. My hon. Friend the Member for Bishop Auckland (Mr. Dalton) and other speakers have told us that they are not inclined to agree with that aspect given to the Bill by certain commentators outside. I should be inclined to call it one more step in the process of the "inevitability of gradualness." It would be out of order to discuss it on this Bill, but perhaps there may come a time when the Chancellor of the Exchequer will complete his researches and even ask the House to amalgamate the Issue Department of the Bank of England with the Treasury itself, thereby putting into effect something which we on these benches have advocated for a very long time. When we are considering book-keeping methods, whether they be the accounts with which we are only personally concerned or the nation's accounts, surely, we as Members of the

House of Commons should understand that book-keeping. The House of Commons is supposed to be the assembly which keeps a complete control over the finances of the country. In trying to understand this Bill as far as I can from reading it and listening to the right hon. Gentleman's lucid and able speech this afternoon, I am inclined to think that with the methods which the Chancellor of the Exchequer is introducing, the House of Commons will not get a complete picture of the nation's finances to which it is entitled if it is to exercise proper control over them.
We are now told that the Issue Department of the Bank of England and the Exchange Equalisation Account will more or less act together. The Exchange Equalisation Account deals with a very large sum of money, and it seems possible, as has already appeared in the American Press, that this Exchange Equalisation Account, indeed other accounts of a similar nature in other countries, can be utilised to hide from the legislature certain acts which may lead in themselves to inflation. The Chancellor of the Exchequer has told us this afternoon that this Bill does not mean that there will be either inflation or any deflation, but those of us who tried to find a reason for the large increase in the fiduciary issue a little while ago were inclined to believe that we had embarked, to a certain extent at any rate, on a policy of inflation.
Inflation causes fear in the minds of the people to-day, because we have seen the effects of inflation in a modern country like Germany. Many of us have seen it at first-hand, and, therefore, if there is in our minds or in the minds of the public outside an idea that any Bill of this nature means, in any considerable degree, inflation, we are quite right in expressing our anxiety and asking that the finances of the country should not be allowed to sink to the level that prevailed in Germany some years ago. Rather precipitately I asked the right hon. Gentleman a question on Clause 2 during the time that he was making his speech. I apologise for hurling that question at him at the end of his speech. Obviously, it is one which he would have to consider. Nevertheless, I hope that the right hon. Gentleman, who I understand is to reply, will give me an answer to it, and in case he may not have


heard it, I will repeat it. It relates to the second paragraph of Clause 2 (2) where it says:
Provided that adjustments may, if the Treasury so direct, be made in respect of interest affecting the current price of any securities and, in the case of securities standing at a premium, in respect of that premium.
I understand that the valuation that will take place weekly will take into account the current market value of the assets in the Issue Department of the Bank of England, and I presume that, if the market value of those assets is below par, the difference between the valuation and parity will be made up by a transfer from the Exchange Equalisation Account, but if, according to the Bill, those securities stand above par and thereby include a premium such premium will not be taken into account in the valuation. In other words, there will be a hidden reserve fund in the Issue Department as far as their assets are concerned. I hope that the right hon. Gentleman has understood my point and that he will be able to give me an answer later on. I am stimulated to these remarks by certain words which the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) uttered when he mentioned the question of gold. In Germany, a country of immense power and with immense labour resources, currency is not attached to gold except to a very minute degree. Nevertheless, that country is able to carry on at a terrific pace and to produce enormous quantities of goods; unfortunately things which we consider are not an asset to any country. May it not be that when we are considering the assets of our own country and the relation between our currency and gold even we might learn from the central banking system of Germany. They seem somehow or other to have been able to keep their internal prices more or less static—certainly they have not risen to any large extent—and they have been able to do that with only a very small quantity of gold in their central bank.
There is not the slightest doubt that, although we say quite easily that our currency is no longer attached substantially to gold, in the minds of those who are responsible for our central banking system there is belief in the solidity and the substance of gold. Should it not be that even though we have proceeded far towards the position of a

managed currency, we might even proceed a little further, and not place, as we do to-day, so much reliance on the power of gold and its power of production. If we do, we must be reminded of the fact that there are certain gold producing countries in the world and that England is not one of them. Certainly one of our Dominions is probably the largest producer of gold but if we want to acquire large quantities of the metal for any purpose whatever—and we appear to want to do so because we are buying large quantities of it—we must go to the country producing it. How can we get that gold? How can we import that commodity or any other commodity unless we can produce here? Therefore, is it so necessary, in order that we should produce the commodities which we have to exchange for this sterile asset, gold, to have such a large amount of gold-backing to our currency.
I welcome this change. I am not so sure that it is so small as the right hon. Gentleman made out, but as my hon. Friend the Member for Bishop Auckland said, it is a step in the right direction and I hope that one of these days the present Chancellor of the Exchequer or some other Chancellor will proceed further upon the path which we have advocated on these benches for so long; and not only modernise bookkeeping methods but our central banking institution as well.

5.42 p.m.

Mr. Hammersley: I would like to say a few words in support of this Measure. There was a time when questions of currency and credit were more or less closed books to the average politician. They were hidden mysteries which we were not expected to understand. Now the wheel has turned the whole circle, and there are many who allege that if we understood these problems a little more clearly we might be able to use the instrument of monetary policy to solve many of our present difficulties. What the ultimate truth of that monetary conception is, I do not know, but I do know that the commercial community as a whole is now very largely interested in these problems.
It is as a member of the commercial community that I would like to add one or two words to what has already been said in support of this Bill. The important duty of any Government is to provide for its people a currency which is ade-


quate in amount for the purposes of trade and is reasonably stable in value. It is against the background of these primary and elementary considerations that we must judge this particular Bill. In 1928 the duty of the Government in this respect was handed over to an independent central institution—the Bank of England. That was in order that the duty of providing an adequate supply of currency of considerable value should be free from political interference. It was done subject to general rules which Parliament then laid down. One of those rules was that there should be some fixed relationship between paper currency and gold reserve. The amount of the note issue which is not covered pound for pound by gold was laid down by Parliament and was approved at a figure of £260,000,000.
Since that time events in the world, as the Chancellor of the Exchequer so aptly explained, has caused the House to approve proposals that the fiduciary issue should be increased from £260,000,000 to £400,000,000. During that same period the value of gold has gone up very considerably, and the remaining part of the backing instead of being backed pound for pound as was the original intention has been backed more than on the pound for pound basis. Gold which has really a value of something like £7 8s, per ounce has been only valued in the terms of the issuing department at £4 5s., and it is desirable that this unreal and fictitious situation should be abolished.
That is what the Bill proposes to do. It puts the valuation of gold by the Issuing Department of the Bank on the really solid basis of to-day's value, and the consequence is an increase of gold cover by something like £100,000,000. At the same time that this is done, the intentions of the Government are to decrease the fiduciary issue by approximately the same amount. I do not know whether it is really quite wise to adjust the two writings up and writings down so carefully. I should have thought that with the necessity of financing rearmament, and in view of the fact that there are a large number of unemployed who should have work and wages, there might be less writing down of the fiduciary issue than the writing up of the value of the gold. But instead of having a little swing of the balance in that direction we have the swing slightly the other way. We have a

decrease, so far as I can see, of something like £5,000,000 in cash in the Issuing Department of the Bank of England.
When the Financial Secretary to the Treasury replies, he might say whether or not the effect of the Bill will be to reduce the reserve of notes in the Banking Department of the Bank of England by some £5,000,000. That is the way I look at it. At any rate, the main effect is to economise in the use of gold. We are going to have a greater proportion of our gold resources used either internally to increase the basis of credit or, externally, to assist the Exchange Equalisation Fund in ironing out fluctuations in the rate of exchange. The increased mobility thus given to the gold reserves is all to the good. It may be argued that the Bill does not go far enough, but it certainly goes in the right direction. When the gold resources come into this country they should be either mobilised in the Banking Department to increase the available amount of currency, or, alternatively, they should be sterilised in the account. We are now immune from that automatic restriction of credit which an abnormal drain of gold may cause in the commercial community. In these respects I am certain the commercial community as well as the financial community will welcome the Bill and give it their hearty support.

5.50 p.m.

Mr. Lewis: The Chancellor of the Exchequer gave us what we have come to expect from him, namely, a very clear exposition in very simple language of matters which are in themselves technical and difficult to understand. I hope that it will not be thought that I have failed to profit by that exposition if I suggest that the real purpose of the Bill may be summed up in a sentence. It seems to me that its purpose is to improve the appearance of sterling in the foreign exchange markets of the world. When I say "improve the appearance," I do not use that expression in any sinister way. I do not mean that it is for the purpose of making sterling appear more valuable than it is. The purpose seems to be to let the true value of sterling be apparent. Obviously, that is a useful purpose to pursue. It is desirable that people should appreciate the strength of the currency. They should think that it is strong and not likely to be subject to extreme fluctuations. But there is something much


more important than that, and that is that not merely should people think or believe that the currency is strong, but that the currency is in fact strong. There is a very great distinction there.
The Chancellor of the Exchequer referred to the operations of the bears. He did not pursue the subject at length. I thought he rather left the impression, whether designedly or not I cannot say; that the bear was somebody who in certain circumstances might be able to damage even a sound currency. I believe that is not really correct. I believe that the only people who can actually damage a sound currency are the Government of any country. If the Government pursue a sound financial policy and a sound trade policy, their currency will remain sound and stable. If they pursue an unwise financial and trade policy, their currency may become weak and consequently unstable. Bears are people who sell something which at the moment they do not possess, in the confident belief that later on they will be able to buy it back for less than they sold it for. They operate only under one of two conditions, either that they consider that something which they propose to operate is at the moment over-valued in the market and they are of opinion that in a short time its true value will be apparent or, alternatively, they are of opinion that something that is truly valued in the market will in a short time, for some reason, actually be worth less. It does not seem to me that those conditions can possibly exist where currency is in fact strong and therefore not liable to extreme fluctuations.

Mr. Loftus: Surely scares about war might depreciate currency, however sound the policy of the Government might be.

Mr. Lewis: No, I do not think so. If the currency is actually sound, a bear on that currency would be too dangerous. It seems to me a positive consideration that the policy pursued by the Government should be such that the currency itself is sound.
The Chancellor of the Exchequer referred to the profit arising, on paper, from the writing up of this amount of gold. He gave us to understand that when he looked at it his mouth watered, but he resisted the temptation. It is very difficult for us to come to any reliable opinion

as to whether he was justified in resisting temptation or not, for the simple reason that we have not sufficient facts before us about the working of the Exchange Equalisation Fund to enable us to form an opinion of any value as to the size of the reserve that the fund needs. The fund has worked for seven years, If, taking the day to day losses or profits the fund has shown at the end of each year a working profit, and if in the most expert opinion available that condition of affairs is likely to continue, then the fund does not require a very big reserve, but if on the other hand the fund has made considerable profit some years and substantial loss other years, and if it be the opinion of those who conduct it that there is grave risk that losses may be made in the future, then, clearly, a very large reserve would be advisable for the protection of the fund. That is a matter on which the Chancellor of the Exchequer has the advantage over us, because he knows the figures, and we do not.
My only object in referring to the matter is to suggest to him that that is a possible way of regarding it when he considers these things in connection with the Budget. The real test is what is the amount of reserves in the fund at the moment and what relation does that bear to the losses that have been incurred in the past, or the foreseeable or probable losses of the future? If the reserve tested in that way is clearly excessive, then it seems to me that the Chancellor of the Exchequer might very well use that excess proportion either in the reduction of debt or for some other purpose. So far as the Bill as a whole is concerned, in common with other hon. Members who have spoken I shall certainly support the Second Reading.

5.57 p.m.

Sir Cyril Entwistle: The Bill has met with general support, and so far as I am concerned it meets with my support. I think the chief alteration, or the most important alteration, is contained in Clause 4 (2) which says that:
Section four of the Bank Charter Act, 1844 (which requires the Department to issue notes in return for gold), shall cease to have effect.
That is a provision which ought to receive the approval of every hon. Member. If there is one thing that is antiquated now and unjustifiable it is the provision in the Bank Charter Act that


as soon as the Issue Department of the Bank of England obtain more gold they must automatically issue currency notes to the exact equivalent of the gold required by the Issue Department; still more so when one realises that the value of the gold against which the notes have to be issued is the artificial value of 85s. an ounce. It is time that artificial figure was got rid of, because it bears no relation to reality. Its only purpose, apparently, is to cause periodically a Stock Exchange scare in regard to gold shares. As soon as people get a little bit nervous and the bears want to operate, we have rumours and scares that gold may go back to the old figure of 85s. per ounce. The only influence that determines the price of gold to-day is the United States of America, because they are the only country in the world with a fixed price for gold. Our own price of gold depends entirely on the dollar exchange between this country and America.
Therefore, it is obviously ridiculous for the Treasury or the Bank of England to cling to the old figure of 85s. Its only relevancy is that if we went back to the Gold Standard on the old basis, which nobody suggests, there might be a temptation to go back to it at the old parity level. That was so disastrous when we attempted it in 1925 that I do not think anyone would dare to attempt it to-day, and the sooner we remove that temptation the better for all concerned. I have referred to the provision that there ought to be an automatic alteration in the note issue according to the gold holdings of the Issue Department of the Bank of England at any given point, but it is a mistake to think that the amount of notes in issue is in itself either inflationary or defilationary in effect. One thing we have learned in experiments in monetary management, and that is that the price level and trade cannot be altered directly by an alteration in the mere amount of the note issue. It is not the number of notes which the Bank of England are entitled to issue which is of importance to trade and to price levels; what matters is the number of notes in circulation which are actually being used for the purchase of goods.
The way in which inflation can take place is not only by an increase in the note issue or the general volume of credit; you have to put that credit into circula-

tion by Government expenditure. We all know that social credit adherents have a very simple way of putting increased credit into circulation, and that is by giving everyone a certain amount of money per annum. That has its attractions, no doubt, to its advocates, but we all know that the reactions and repercussions of any proposals of that kind would soon destroy the whole basis on which the prosperity of this country has been built up. I am very pleased that the Debate has at last laid the bogy of the fetish of the Gold Standard. I remember the Debates on this subject some years ago, in which hon. Members thought that if they maligned gold sufficiently we should get an enormous advantage to the general welfare of the country. Experience has shown that there is nothing more absurd, just as there were the strongest arguments against going back to the Gold Standard at the old parity level of 85s., there are the strongest arguments to-day against thinking that by trying to get rid of gold you are thereby going to improve our trade or bring the millennium nearer.
The position of gold does not depend on this country or on any one country. It happens to be the only medium of exchange which inspires the general confidence of the nations of the world, and if we have to indulge in such things as war, which God forbid, gold will have its value notwithstanding all the monetary cranks in the world. It is very necessary to have the solid backing of gold in the Bank of England for purposes of trade and to meet exceptional conditions which arise when we have a run on short loans due to scares in the international markets. What we all desire is a stable price level, but that is not to be obtained by attacking gold as gold, nor is it to be obtained by means of this Bill or by trying to fix an arbitrary price of gold. A price for gold has already been fixed within certain limits in the United States of America and if we want a stable price level and all the advantages to be derived therefrom the way in which to seek it is by getting stabilisation between the various exchanges of the world.
An attempt was made to do this by the Tripartite Agreement between the Governments of this country, France and the United States, and we know how difficult it is to bring about this very desirable stabilisation when we remember the history of that agreement. It has had to be


modified with regard to France on two occasions, and that stabilisation has been achieved only under very distinct limitations and subject to many qualifications. But it is a most desirable thing from the point of view of trade. What the trader wants to know is the amount he gets in his own currency when he sells his goods in a foreign country, and that can be obtained only by measures to bring about stabilised exchanges. That is effected by the Bill. In so far as it goes in removing the artificial price of gold, and in not making it obligatory to make automatic increases in the note issue merely because the Issue Department of the Bank of England obtains an additional quantity of gold, the Bill is in the right direction and should have the commendation of the House.

6.8 p.m.

Mr. Benson: The reception in the financial Press of this Bill was, to my mind, somewhat amusing. One half of the financial journals decided that the Bill was the final step in the direction of a managed currency and the other half that it was the first step in the direction of a re-monetisation of gold. In other words, they decided that the Bill meant that the Government were proceeding in two diametrically opposite directions. After further consideration they came to the conclusion that the Bill, as the Chancellor of the Exchequer has said, means little or nothing. We on this side of the House give it our blessing, but we do not regard it as of very great importance. We certainly see no harm in it. The hon. Member for East Birkenhead (Mr. White) said that it marked a revolution from the days of the Bank Charter Act of 1844. As a matter of fact, it marks a much more recent revolution than that. It marks a revolution since 1931. I remember that at the General Election of 1931 members of the Liberal party came to me and asked me to pledge myself to oppose any attempt to nationalise the Bank of England. I gave a point-blank refusal, and they went in a body and voted for my opponent. I am not sure that they backed the right horse. It is perfectly true that the National Government have not nationalised the Bank of England, but they have nationalised all the important functions of the Bank of England.
This Bill is a notification to the world that the currency policy of this country

is finally, completely and absolutely under the control of the Treasury, and that the Bank of England is nothing more than the office boy so far as currency and financial policy are concerned. We have not the slightest objection to that. The Bill itself is really a very small Measure. I have tried to find out what changes it makes in actual practice. So far as I can see the only real change is that in future the profits of the Issue Department of the Bank of England will go to the Exchange Equalisation Account instead of to the Treasury Account. Apart from that it merely makes changes in name and in theoretical figures but no change in actual practice. Some hon. Members have raised the question as to whether the Bill increases the power of the Government. It does not for the simple reason that it could not. The power of the Treasury, before the Bill is passed over currency matters, is absolute. The Chancellor of the Exchequer pointed out that on the 6th January the Treasury took £350,000,000 of gold out of the Department of the Bank of England and at the same time doubled the fiduciary issue. If they have power to do that then, quite obviously, the power of the Treasury requires no augmentation; it is absolute and complete.
One of the arguments used by the Chancellor of the Exchequer was that it would give our note issue a better showing to the world, and the hon. Member for Colchester (Mr. Lewis) thought it would improve the appearance of sterling. Does it do either of these things? One effect on the note issue is that it reduces the theoretical backing by 20 per cent. It takes something like £90,000,000 of gold out of the assets of the Issue Department of the Bank of England, without replacement though admittedly it is little more than a change without any difference. Nowadays a Bank of England note is in effect a Government note and it has all the backing that the Government wishes to give it. It is called a Bank of England note simply for the sake of convenience; in reality it is a Government note and stands just how and where the Government wish it to stand.
In the enormous sums of gold in the Exchange Equalisation Account, which is primarily to defend British currency and which stands behind the Bank of England note, we have all the resources we require. There are only two things


which can affect our currency: first there is the secular effect of adverse or favourable trade balance, and, secondly, the policy of the Government. If the Government wish to be inflationary they can be inflationary, subject of course to the consent of this House. If they wish to follow a deflationary policy they can do so. There is nothing in the Bill which prevents it or which facilitates it. It is purely a question of Government policy subject to the consent of this House. The position of the £ can be controlled if the Government wish. The only thing the Government cannot control is the secular effect of the trade balance, and that of course no one can control. The Bill is merely changing of name, and not changing of actuality. The actuality is that complete and absolute control of all currency rests with the Treasury, and this Bill neither increases nor decreases that control.

6.15 p.m.

The Financial Secretary to the Treasury (Captain Euan Wallace): I think the House will agree that the Chancellor of the Exchequer has every reason to be satisfied with the reception which this extremely complicated and technical Measure has had this afternoon. Hon. Members will probably agree also that this reception is in some considerable degree due to the clarity of the explanation which my right hon. Friend gave to the House, and I am sure that they will sympathise with me in having to speak after such a chief. My right hon. Friend has explained the Bill so clearly as to leave no necessity for the final Government spokesman to do more than reply to those comparatively detailed points which have been very properly raised in various parts of the House.
I will begin with the speech of the hon. Member for Bishop Auckland (Mr. Dalton), who opened the Debate from the Front Opposition Bench. The hon. Gentleman suggested that an excess of gold is not an unmixed blessing, and he asked why we should not change some of that gold into stocks of food or raw materials. As the hon. Gentleman said that, I noticed that he kept one eye on the Chair, and I am certain from the way he said it that he would not expect me to answer a question which appears to be well outside the scope of this Bill. He went on to refer to the gold "profit,"

the £95,000,000, minus £9,000,000 approximately, which is going into the Exchange Equalisation Account, and he was perturbed at what he understood was a nuance in my right hon. Friend's speech in laying some emphasis on the words "at this moment." I do not think it is necessary for me to do more than reiterate the very definite and categorical pledge which my right hon. Friend immediately gave, that he had no intention whatever of using this profit as a subvention to revenue.
The next point in the hon. Gentleman's speech with which I wish to deal is his query as to how the note issue is to be fixed in future. Here again, I would simply like to repeat, for purposes of record, what the Chancellor said—namely, that the procedure will be precisely the same as before and that the note issue will be exactly equal to the gold held in the Issue Department of the Bank of England at its current value, plus the Fiduciary Note Issue. The Bill certainly does not give any greater or less elasticity to the Treasury and the Bank in this respect. The hon. Member for Bishop Auckland went on to say that he thought some inflation would be desirable and this pious hope was echoed by an hon. Friend on this side of the House; but whether or not that is the case, this is emphatically not the moment to discuss it or to decide it, upon what is in its essence a purely machinery Bill.
The last point in the hon. Member's speech to which I wish to refer—here again, the point was taken up by other hon. Members—is the question of greater publicity in regard to the operations of the Exchange Equalisation Account. I do not think I can do more than reiterate what my right hon. Friend said in this House on 28th June, 1937, that he was ready to agree that the state of the annual account as at 31st March should not only be available to the Comptroller and Auditor-General, but should also be confidentially communicated to the Public Accounts Committee by the following 31st January. I am certain that, while hon. Gentlemen would very naturally like to feel that we in this House, who after all do control the currency as we do every other policy of this country, should have as much information as is consistent with the public welfare, they will appreciate that information given to Members of this House might also become available to


persons and organisations who would not use it in the best interests of this country. The last question which the hon. Member asked was whether the profits of the Issue Department of the Bank of England, which at the present moment accrue to the Treasury—as some of those very pleasant Miscellaneous Receipts which occasionally help a Chancellor round awkward corners—would in future go to the Exchequer Equalisation Account. That is so.
The hon. Member for East Birkenhead (Mr. White), who I was glad to hear gave the Bill a welcome, asked whether it gave to the Chancellor any powers he did not possess at present. My answer is that it does not. It is purely a machinery Bill. I was glad to hear the hon. Gentleman express his pleasure that this Chancellor had refused the temptation to use this hidden profit for any revenue purpose and had rejected what the hon. Member called any easy device. Of course, it is only in line with the honesty and austerity of my right hon. Friend's Budget for the current year that he should, I will not say contemptuously, but very definitely, reject a temptation of this kind. The hon. Member for East Birkenhead asked another question to which he probably would like to have an answer now. He asked whether the authorities can still require that up to £10,000 in gold should be surrendered at the old Mint value of 85s. per fine ounce. Yes, they can. It is not proposed to alter that Statutory provision, which is contained in Section II (2) of the Currency and Bank Notes Act, 1928, the object of which is simply to prevent gold hoarding, and which I do not think anybody would like to see done away with.
My hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne), who also gave the Bill a welcome, asked a specific question with which I would like to deal. He wanted to know whether the transfer of £86,000,000 to the Exchange Equalisation Account would increase the amount of Treasury Bills available on the market. The answer is that it will not. This surplus will be transferred in securities, and in so far as Treasury Bills are transferred from the Issue Department to the Exchange Equalisation Account, they will continue to be held by the Exchange Equalisation Account until they are required to be realised for any purpose of that Account.
Therefore, the total amount of Treasury Bills held by the Issue Department and the Exchange Equalisation Account together will not be affected by this transfer; nor, therefore, will the market holdings be affected.

Sir J. Wardlaw-Milne: They are not to be a reserve of the Exchange Equalisation Account, but are to be available for its ordinary purposes?

Captain Wallace: They will simply be an addition to the resources of the Exchange Equalisation Account. I imagine that once they are transferred they will become absorbed in the account, and will be indistinguishable from its other resources. I pass now to the speech of the hon. Member for Bassetlaw (Mr. Bellenger), who emphasised the importance of the House understanding as much as it could of the national book-keeping. Here I am sure we shall all cordially agree with the hon. Member in theory, but recognise some of the difficulties in practice to which I have alluded just now in referring to the Exchange Equalisation Account. I can assure the hon. Member that the House will get just as good a picture of the currency and financial affairs of the country if and when it passes this Bill as it did before, and as far as I can see—and as far as the Chancellor can see, which is very much further—this Bill cannot possibly be used to hide secret inflation. The hon. Member went on, with a frankness and naivete which I have often admired on other occasions, to say that he and some of his friends, when the announcement was made on 6th January that the Fiduciary Issue was to be temporarily increased under powers possessed by the Treasury, immediately started to harbour dark and dangerous suspicions about what the Government were going to do. The hon. Member will be just as glad as I am to know that he was profoundly mistaken.
He asked me a specific question which, if I had wished to evade it I might have left to the Committee stage, but to which I hope to be able to give an answer now, because I think it is an important point. It is in regard to the proviso to Sub-section (2) of Clause 2. The reference in that paragraph to securities standing at a premium does not mean that such securities will be valued at par. It merely allows the Treasury and the Bank of England to make provision out of


income rather than out of capital for the inevitable decrease in price which must occur as a security purchased at a premium approaches the date of its redemption. It might of course be maintained that if that was done it should, as a logical corollary, be arranged that the income on stocks bought below par should be written up each year to allow for the inevitable appreciation by the redemption date. This is very rarely done, and in fact it has never been done for the securities in the Issue Department of the Bank of England, because general policy requires that we should assess income on conservative lines and that income should never be inflated to take account of eventual capital appreciation, however inevitable it is, which has not in fact been actually realised. I trust that the hon. Gentleman, who always represents the more conservative and austere financial point of view in the party opposite, will agree with that sentiment.

Mr. Bellenger: While thanking the right hon. and gallant Gentleman for his answer, which I have followed with close attention, may I ask him whether I am right in assuming that all the assets held by the Issue Department are redeemable assets?

Captain Wallace: I would not like to commit myself on that at the moment, but, subject to correction, I believe that to be so. The hon. Gentleman will, however, appreciate that these are matters of great complexity, and one hesitates to give an answer which one cannot check and recheck with the people responsible.
I hope I have now dealt with most of the specific questions which have been asked, and I only wish in conclusion to make clear one important point. As the Chancellor has already told the House, the Bill involves no fundamental change in the arrangements for controlling the amount of notes which the Bank of England can issue. That is a point which seems to have been at the back of the minds of certain hon. Members this evening. I wish to be quite categorical about it. The Bill deals entirely with matters of machinery and, in particular, there is neither more flexibility nor less under the new arrangement with regard to the ability of the Bank to issue notes. When, for instance, public demand arises for an additional £1,000,000 worth of notes the Bank

meets that demand in the first place by drawing on the reserve of notes in the Banking Department.
Assuming that the Bank wishes to maintain this reserve in the Banking Department at its former figure, the Bank will make it good by the issue of £1,000,000 worth of notes from the Issue Department to the Banking Department. To cover the resulting increase in the note issue from the Issue Department, two courses are open to the Bank. Either it can ask the Treasury to increase the fiduciary note issue by £1,000,000, under the powers which it already has and which are at this moment in operation under a Treasury Minute, or it can acquire sufficient gold to cover the additional £1,000,000 worth of notes. Both courses are open to the Bank at this moment and will remain open under the Bill, which has no effect on these matters except with regard to one point of detail involved in the second of these two courses. That is a point which can very well be explained on a later occasion and I think I should best serve the convenience of the House now, if I invited it to give the Bill a Second Reading without further ado and allow Members on all sides time to read the very lucid, detailed and comprehensive explanation of the Chancellor, which I feel sure will give them any ammunition that is to be obtained for putting down Amendments or raising points during the Committee stage. I know that my right hon. Friend is grateful to the House for the reception which the Bill has had, and I hope that it will now receive a Second Reading.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Bill committed to a Committee of the Whole House, for To-morrow—[Major Herbert.]

EXPORT GUARANTEES BILL.

Read the Third time, and passed.

The remaining Orders were read, and postponed.

Resolved, "That this House do now adjourn."—[Major Herbert.]

Adjourned accordingly at Twenty-four Minutes before Seven o'Clock.